TLDR
- The CFTC filed lawsuits against Illinois, Arizona, and Connecticut, claiming exclusive federal jurisdiction over prediction markets and challenging state-level crackdowns on operators like Kalshi.
- The NFL sent a letter to the CFTC urging prediction market operators to stop listing contracts on officiating, injuries, and other trades susceptible to manipulation.
- CFTC Chairman Michael Selig said the agency will likely reject injury-related prediction market contracts where players could profit from hurting opponents.
- The CFTC’s enforcement director warned that insider trading laws do apply to prediction markets, pushing back on claims from finance figures who said otherwise.
- Tribal gaming leaders used the Indian Gaming Tradeshow to rally opposition against prediction markets, calling them an “existential threat” to tribal gaming sovereignty.
The Commodity Futures Trading Commission made its first legal move against state regulators this week, filing lawsuits against Illinois, Arizona, and Connecticut over their recent actions targeting prediction market operators.
The lawsuits argue that the federal agency has exclusive jurisdiction to regulate event contracts under the Commodity Exchange Act. More than a dozen states have filed legal challenges against prediction market operator Kalshi over the past year.
CFTC Chairman Michael Selig said the states were trying to impose “inconsistent and contrary obligations” on market participants. He argued that Congress rejected a fragmented patchwork of state regulations because it led to weaker consumer protections.
In its 29-page lawsuit against Illinois, the CFTC referenced cease and desist letters that the Illinois Gaming Board had sent to three CFTC-registered designated contract markets. The federal agency said the state regulators “misapprehend” the nature of the contracts.
NFL Engages With CFTC on Market Manipulation Concerns
Separately, the NFL weighed in on the debate by sending a letter to the CFTC on March 29. The league asked prediction market operators to avoid listing what it called “inherently objectionable” trades.
These include contracts tied to officiating decisions, player injuries, and other events the league views as easy to manipulate. The CFTC indicated it would likely prohibit injury-related contracts.
Selig said the agency is focused on high-risk contracts where a player could earn money by injuring an opponent. He pointed to the agency’s responsibility to reject contracts that are “readily susceptible to manipulation.”
The NFL’s history with this issue runs deep. In 2012, the league suspended then-New Orleans Saints coach Sean Payton for an entire season after discovering a slush fund that paid players to injure opponents. Nearly 30 players took part in that bounty program.
The NFL’s stance on prediction markets has shifted over time. Last November, the league sent a memo to all 32 club owners about working with state regulators to limit or prohibit prop bets. Weeks later, NFL vice president Jeff Miller told Congress the league had no plans to participate in prediction markets.
But Miller changed his tone before the Super Bowl in February, calling event contracts “innovative.” The shift came as other professional leagues began exploring deals with prediction market operators.
Tribal Gaming Leaders Rally Against Prediction Markets
The CFTC’s enforcement director, David Miller, also issued a warning about insider trading on prediction markets. During the Super Bowl, suspicions arose around trades involving Bad Bunny’s opening song and whether Jeff Bezos would attend the game.
Miller pushed back on the idea that insider trading laws do not apply to these markets. He called the claim a “myth” and said violators could face prosecution.
At the Indian Gaming Tradeshow and Convention in San Diego, tribal gaming leaders staged a strong push against prediction markets. IGA Conference Chair Victor Rocha organized four sessions on the topic, calling it an “existential threat” to tribal gaming.
IGA Chairman David Bean said he believes the Supreme Court has a “strong likelihood” of taking up the prediction market case before the 2028 presidential election. Bean said the legal tide began shifting when courts examined questions related to the Indian Gaming Regulatory Act.
Senator Richard Blumenthal of Connecticut criticized Selig for the CFTC’s lawsuits against states. Blumenthal called the chairman “a crony of Kalshi” who was “using the CFTC to bully states on their behalf.”
One of the attorneys representing the Justice Department in the CFTC lawsuits is Yaakov M. Roth, who previously represented prediction markets in the 2024 Kalshi vs. CFTC federal case on election betting. Rocha described Roth’s involvement as a “blatant conflict of interest.”
