Feds and Sixteen States Tussle Over Predictive Market Oversight, Judicial Battles Escalate to the Supreme Court

The rapid growth of the prediction market trading scale in the United States has triggered a fierce competition for regulatory authority between the federal and state governments. The Commodity Futures Trading Commission (CFTC) continues to consolidate its exclusive regulatory authority through litigation, resisting restrictions and bans from various states.

Currently, 16 states across the nation have initiated judicial proceedings against prediction market platforms, with Minnesota being the first to implement a statewide ban. In response, the CFTC promptly filed lawsuits against this state and five others, showing a clear characteristic of cross-party, cross-level game-playing in this regulatory dispute.

This Tuesday, the Governor of Minnesota signed a bill to completely ban prediction markets, becoming the first state in the United States to enforce such a ban, prompting the CFTC to quickly initiate a lawsuit in response. Industry lawyers have stated that the federal government directly suing state governments is a rare and aggressive regulatory approach, highlighting the intensity of the dispute.

Industry legal professionals have pointed out that the CFTC's enforcement method of suing state governments is extremely rare and unconventional. Jeff Lerrick, who once served as the CFTC's chief trial attorney and is now at Husch Blackwell law firm, stated that the federal agency's direct litigation against state governments has broken with past regulatory practices, highlighting the intensity of this regulatory authority struggle.

The CFTC Chairman, who took office in December last year, holds full authority over the institution and has a strong stance, repeatedly stating clearly that states may not interfere with federal financial market regulation, and violators will face federal lawsuits.

This dispute breaks with traditional party opposition: the 16 states involved include attorneys general from both parties, and the Minnesota ban was passed with high bipartisan support. However, the CFTC's enforcement shows a clear differentiation, with all six sued states led by Democratic attorneys general. For Republican-led states, the CFTC only provided legal opinions, submitting an amicus brief in Ohio to explain its exclusive jurisdiction, without initiating formal lawsuits, sparking controversy over partisan favoritism.

The focus of this game-playing round shows a distinct characteristic of differentiated enforcement: The six states sued by the CFTC to date, including Wisconsin, New York, Connecticut, Illinois, Arizona, and Minnesota, all have Democratic attorneys general.而对于共和党籍总检察长主导的州，CFTC仅采取辅助法律手段，仅在俄亥俄州提交法庭之友意见书阐释自身专属管辖权，未发起正式诉讼。

Many state justice departments unanimously believe that the CFTC has overstepped its authority and encroached on state-level gambling regulatory powers, questioning whether its differentiated enforcement has political overtones.

The core disagreement between the two sides is the nature of the agreement: States view prediction market event contracts as illegal gambling, under state jurisdiction; the CFTC, however, identifies them as financial derivatives swap contracts, falling within the exclusive regulatory purview of the federal government. The CFTC emphasizes that all lawsuits are merely to defend the federal statutory regulatory authority and to protect the normal operation of compliant platforms.

The CFTC's official response emphasizes that all lawsuits are solely to defend the federal statutory regulatory authority. The relevant platforms operate in compliance with the federal legal framework, and state regulatory actions and restrictions are suspected of interfering with the federal financial transaction order. The institution's intervention is entirely based on its statutory regulatory duties.

On the judicial front, the CFTC has already achieved a preliminary victory in Arizona, with the court halting local criminal accountability against the leading platform Kalshi, while the cases in the other five states are still under trial. In addition, the federal appeals court ruled that New Jersey has no authority to regulate the prediction market.

Industry experts predict that there may be judgment divergences in various local circuit courts, and it is highly likely that this ultimate dispute between the federal and state regulatory authorities will be decided by the U.S. Supreme Court in the final ruling.