CFTC Predicting Litigation Success over Multiple State

By: John Mikuta

Through recent litigation actions, the Commodity Futures Trading Commission (“CFTC”) continues to stake out an aggressive position in the fight over who has the authority to regulate prediction markets.

On May 18, 2026, Minnesota Gov. Tim Walz signed into law SF 4760, an omnibus public safety bill that made it a felony to operate or assist in operating a prediction market.[1]  The next day, the CFTC filed a lawsuit against the State of Minnesota, seeking a preliminary injunction to prevent the law from taking effect on August 1, 2026.[2]  Kalshi, the world’s largest prediction market,[3] also filed a lawsuit of its own.[4]

The new Minnesota law broadly defines a “prediction market” as “a system that allows consumers to place a wager on the future outcome of a specified event that is not determined or affected by the performance of the parties to the contract.”[5]  The law includes within the definition of an unlawful prediction market the future outcomes of “natural or human-made disasters” and “short-term weather events or conditions.”[6]  In its press release announcing its lawsuit against the State of Minnesota, the CFTC characterized the law as “criminalizing weather-related event contracts.”[7]

Then, on May 28, 2026, the CFTC moved to intervene in an action against Rhode Island state officials filed one week earlier by Kalshi.[8]  Kalshi filed suit after the State of Rhode Island threatened to take enforcement action against it.[9]  On the same day that Kalshi filed its lawsuit in federal district court, the State filed an enforcement action against Kalshi in state court.[10]  The CFTC then intervened to “reiterate[] its continued commitment to affirming exclusive jurisdiction over CFTC-registered prediction markets.”[11]

The Minnesota and Rhode Island actions bring the total number of CFTC actions against states to seven.  In April 2026, the CFTC filed lawsuits against Arizona, Connecticut, Illinois, New York, and Wisconsin after those states filed lawsuits or other enforcement actions against CFTC-registered prediction market operators.[12]  While the CFTC’s filings continue to assert its right to exclusively regulate its licensed prediction market operators, the CFTC does not dispute that states have general police powers to regulate gambling.[13]  The CFTC asserts, however, that Congress expressly carved out CFTC-regulated derivatives markets from state regulatory frameworks.[14]

The CFTC’s litigation actions set up direct battles between states and the federal government to decide who has jurisdiction to regulate prediction markets.  The first U.S. Court of Appeals to address the issue, the Third Circuit, adopted the federal government’s position, ruling that Kalshi may offer sports-related event contracts on its prediction market without being subject to state gambling laws.[15]  Similar appeals are pending in the Fourth, Sixth, and Ninth Circuits.[16]  Should one of those courts disagree with the Third Circuit, a circuit split would result, and the issue would be ripe for Supreme Court review.

The CFTC’s actions overlap with the agency’s request for public comments on rulemaking related to prediction markets, including issues such as which types of event contracts could be prohibited as contrary to the public interest, how to address trading on non-public information, and how prediction markets are similar to or different from other types of derivative exchanges.[17]  After receiving comments, the CFTC submitted its proposed rulemaking to the White House Office of Management and Budget.[18]  The details of the CFTC’s proposal have not been revealed.

Taken together, the CFTC’s actions—exemplified by the Minnesota and Rhode Island lawsuits—reflect more than routine enforcement or oversight.  They illustrate a deliberate and increasingly aggressive strategy by the CFTC to consolidate regulatory authority over prediction markets at the federal level.  By filing suit within days of the enactment of Minnesota’s new law and quickly stepping into the Rhode Island litigation, the CFTC is signaling that it will not tolerate state-by-state encroachment on what it sees as a unified federal regime.

It remains to be seen whether the end result of the nationwide litigation will be a single, nationally regulated prediction-market framework, or a fragmented system in which the legality of prediction markets varies from state to state.  How courts, including potentially the Supreme Court, resolve the issue will determine not only the scope of the CFTC’s authority but also the shape of the prediction market industry as a whole.

[1] See Minn. SF 4760, art. 8, § 3, available at https://legiscan.com/MN/text/SF4760/2025.

[2] United States v. Minnesota, No. 26-cv-2661 (D. Minn. filed May 19, 2026).

[3] Tradeweb and Kalshi Announce Strategic Partnership to Expand Institutional Access to Prediction Markets, Tradeweb Markets (Feb. 19, 2026), https://www.tradeweb.com/newsroom/media-center/news-releases/tradeweb-and-kalshi-announce-strategic-partnership-to-expand-institutional-access-to-prediction-markets/.

[4] KalshiEX LLC v. Ellison, No. 26-cv-2778 (D. Minn. filed May 27, 2026).

[5] See Minn. SF 4760, art. 8, § 3.

[6] Id.

[7] CFTC Sues Minnesota to Block State Law, CFTC Release No. 9233-26 (May 19, 2026), https://www.cftc.gov/PressRoom/PressReleases/9193-26.

[8] KalshiEX LLC v. Furcolo, No. 1:26-cv-327, Dkt. No. 19 (D.R.I. filed May 21, 2026).

[9] CFTC Sues to Block State Enforcement in Rhode Island Amid Ongoing Efforts to Preserve Jurisdiction, CFTC Release No. 9238-26 (May 28, 2026), https://www.cftc.gov/PressRoom/PressReleases/9193-26.

[10] Furcolo, Dkt. No. 19.

[11] CFTC Release No. 9238-26, supra n.9.

[12] A.J. S. Dhaliwal, Aaron Levy, Graham McCall, CFTC Sues Minnesota, Bringing Prediction Markets Preemption Fight to Six States, Sheppard (May 28, 2026), https://www.sheppard.com/insights/blogs/cftc-sues-minnesota-bringing-prediction-markets-preemption-fight-to-six-states.

[13] Minnesota, Compl., Dkt. No. 1, ¶¶ 20–21; Furcolo, CFTC Compl., Dkt. No. 19-1, ¶ 44

[14] Minnesota, Compl., Dkt. No. 1, ¶¶ 71–72; Furcolo, CFTC Compl., Dkt. No. 19-1, ¶¶ 46–47

[15] KalshiEX LLC v. Flaherty, 172 F.4th 220 (3d Cir. 2026).

[16] See Kalshiex LLC v. Martin, 25-1892 (4th Cir. filed Aug. 6, 2025); Kalshiex LLC v. Schuler, No. 26-3196 (6th Cir. Filed Mar. 11, 2026); KalshiEx LLC v. Orgel, No. 26-5235 (6th Cir. Filed Mar. 23, 2026); Blue Lake Rancheria v. Kalshi, Inc., No. 25-7504 (9th Cir. filed Nov. 28, 2025).

[17] CFTC Seeks Public Comment on Advanced Notice of Proposed Rulemaking Relating to Prediction Markets, CFTC Release No. 9194-26 (Mar. 12, 2026), https://www.cftc.gov/PressRoom/PressReleases/9194-26.

[18] Tanya Chepkova, CFTC Pushes Prediction Markets into Formal Federal Rulemaking, Finance Magnates (May 28, 2026), https://www.financemagnates.com/fintech/cftc-pushes-prediction-markets-into-formal-federal-rulemaking/.