Federal Government Sues Illinois, Connecticut and Arizona to Protect Prediction Markets — Two Major Rulings Due Today

The prediction market legal war just reached a new level. On Thursday, the Commodity Futures Trading Commission filed simultaneous lawsuits against Illinois, Connecticut, and Arizona — three states that have been cracking down on platforms like Kalshi and Crypto.com — in a move that legal experts are already calling unprecedented. The federal government is not merely filing amicus briefs anymore. It is suing states directly, demanding courts declare that state gambling laws are “unconstitutional and invalid” when applied to CFTC-regulated prediction markets.

And the timing could not be more dramatic. As of Friday morning, two critical rulings are expected: one from a federal judge in Arizona weighing Kalshi’s bid to block the state’s criminal charges, and another from a Nevada state court deciding whether to convert a temporary restraining order into a full preliminary injunction. If you want to understand where prediction markets are headed — and what it means for bettors, sportsbooks, and the broader industry — today is the day to pay attention.

Why the CFTC Went Nuclear

The CFTC’s position is straightforward: Congress granted the agency exclusive regulatory authority over designated contract markets under the Commodity Exchange Act, and states have no business writing their own rules for federally registered exchanges. CFTC Chairman Michael Selig drove that point home in the announcement, saying the commission has “exclusive regulatory authority over these markets” and would defend against “overzealous state regulators.”

But the states are not backing down. Connecticut Attorney General William Tong called the federal lawsuits “recycled industry arguments” that have already been rejected in district courts across the country. Illinois Governor JB Pritzker’s office went further, accusing the Trump administration of “carrying water for companies driving well-documented and lucrative insider trading schemes.” Arizona, for its part, acknowledged the lawsuits and declined further comment — notable given that the state filed 20 criminal misdemeanor charges against Kalshi executives just two weeks ago, on March 17, the first criminal prosecution of a prediction market company in U.S. history.

The CFTC’s aggressive posture has a political backdrop that state officials have been quick to highlight. Donald Trump Jr. serves as a strategic advisor to both Kalshi and Polymarket, and CFTC Chair Selig had already signaled the agency’s direction in a Wall Street Journal op-ed in February, warning: “The CFTC will no longer sit idly by while overzealous state governments undermine the agency’s exclusive jurisdiction.”

What Is at Stake in Today’s Rulings

The two decisions expected today capture the chaotic state of this legal war in miniature. Each represents a different front in the same fundamental fight over who gets to regulate an industry that processed billions in weekly volume in 2025.

In Arizona, federal Judge Michael Liburdi is weighing Kalshi’s request for a preliminary injunction. Kalshi filed its preemptive federal lawsuit on March 13 — four days before Arizona escalated to criminal charges. If Liburdi grants the injunction, it would effectively block the state from enforcing its gambling laws against Kalshi while the case plays out, dealing a major blow to Arizona’s aggressive posture. If he denies it, Kalshi faces the extraordinary situation of defending criminal charges under state law while simultaneously arguing those laws cannot apply to it.

In Nevada, a state court in Carson City is holding a hearing to determine whether to extend the 14-day temporary restraining order issued on March 21 into a longer preliminary injunction. That TRO, issued by Judge Jason Woodbury, already blocks Kalshi from offering sports, politics, and entertainment contracts in the state — the first time Kalshi has been forced offline anywhere it was actively operating. The Nevada Gaming Control Board argued that Kalshi’s unlicensed operation causes “irreparable and non-compensable” harm, including risks to underage gambling and event integrity. A preliminary injunction would keep those restrictions in place through what could be a years-long legal process.

A Fractured Legal Scorecard

The broader landscape makes these rulings even more consequential because courts have been sharply divided. At the preliminary injunction stage, Kalshi has won in New Jersey, California, Tennessee, and D.C. It has lost in Maryland, Nevada, Massachusetts, and Ohio, where a federal judge ruled in March that sports contracts are not “swaps” under federal law — directly contradicting a Tennessee ruling that said they are. Every single state-court action against Kalshi has ended in a win for regulators.

That split is exactly why the 9th Circuit’s April 16 oral arguments — covering Kalshi, Robinhood promo code, and Crypto.com promo code‘s Nevada appeals — are being watched so closely. The CFTC has filed amicus briefs in support of the platforms. A decision there, combined with the 4th Circuit’s expected ruling on Maryland in May, could create the circuit split that sends this all the way to the Supreme Court. Legal analysts believe a SCOTUS petition is not a matter of if, but when.

What It Means for Bettors and Sportsbooks

For anyone who uses prediction markets to bet on sports, elections, or current events, the practical reality is this: the platform you use today may not be available in your state next month. Nevada users have already lost access to Kalshi’s sports, politics, and entertainment markets. Massachusetts restrictions have been held off by an appeals court stay — but only temporarily. The patchwork of injunctions and restraining orders means the product available on Kalshi’s app varies dramatically depending on your zip code.

For traditional sportsbooks, this fight carries high strategic stakes. Nevada regulators have been explicit that they view prediction market sports products as direct competitors to the state’s licensed betting operators. The casino industry successfully intervened in Nevada’s federal case, and the Nevada Resort Association has been active throughout the litigation. A broad CFTC victory — if states are ultimately barred from regulating CFTC-registered exchanges — would open every sports betting market in the country to prediction market competition without those platforms needing a single state license.

On Capitol Hill, legislators are watching the courts while also moving their own legislation. Senators Adam Schiff and John Curtis introduced a bipartisan bill on March 23 that would ban prediction markets from listing sports contracts and casino-style games entirely — and they have publicly stated they believe it has enough support to pass. Whether Congress moves before the courts resolve the jurisdictional question may ultimately determine how this ends.

Today’s rulings will not settle anything permanently. But they will shape where this industry stands heading into what promises to be a defining spring for prediction markets, sportsbooks, and the bettors caught in the middle.