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41 State AGs Tell CFTC to Stand Down on Sports Prediction Markets

Bipartisan coalition calls Kalshi- and Polymarket-style event contracts "unregulated sportsbooks" and demands states retain jurisdiction.

Category: iGaming News - USA · By Growl Games Editorial Team · Mon May 11 2026 · Updated Thu Jul 23 2026

41 State AGs Tell CFTC to Stand Down on Sports Prediction Markets

Table of Contents

Summary

A bipartisan coalition of 41 state attorneys general, plus the District of Columbia, sent a formal comment letter dated April 30, 2026 to Commodity Futures Trading Commission Chairman Michael S. Selig, asking the agency to confirm through rulemaking that it lacks jurisdiction over sports-related event contracts. The filing escalates a year-long conflict between licensed state sportsbook regimes and federally regulated prediction-market exchanges including Kalshi and Polymarket, and lands while two appeals-level rulings continue to reshape the field.

The Letter

The coalition is co-led by New Jersey Attorney General Jennifer Davenport and Maryland Attorney General Anthony Brown and includes the AGs of Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Nebraska, Nevada, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Wisconsin, and the District of Columbia. The letter states that "any distinction between sportsbook bets and prediction-market bets is illusory" and argues that contracts on game winners, point spreads, totals, and player statistics replicate traditional wagers while bypassing state consumer protections, integrity safeguards, and tax obligations. The AGs also dispute that sports outcomes qualify as "swaps" under the Commodity Exchange Act, arguing such contracts lack the financial, economic, or commercial exposure derivatives are designed to hedge.

The filing responds to a CFTC advance notice of proposed rulemaking issued in March 2026 on the scope of "gaming" and "sports competition" in event-contract listings. Two recent decisions raised the stakes. On February 19, 2026, a federal court in Tennessee granted Kalshi a preliminary injunction, finding the operator likely to succeed in arguing its contracts qualify as swaps under the CEA. On April 6, 2026, the U.S. Court of Appeals for the Third Circuit affirmed a preliminary injunction against New Jersey, holding that the CEA likely preempts state gambling enforcement as applied to CFTC-regulated event contracts. The Third Circuit ruling conflicts with several district court outcomes and is widely expected to drive eventual Supreme Court review.

Operators in Scope

The coalition's letter explicitly names Kalshi and Polymarket. Both operate as or through CFTC-designated contract markets and have grown rapidly on sports volume; one industry tracker has placed Kalshi among the top U.S. sportsbooks by handle. The CFTC's designated contract market roster has also expanded to include Polymarket US and Aristotle Exchange, signaling a compliant path for further event-contract listings. Robinhood and Crypto.com have offered access to prediction-market contracts through partnerships.

Parallel Federal and State Actions

Several parallel moves cluster around the same week. On May 1, 2026, the U.S. Senate blocked its own members from betting on event markets. On May 5, 2026, the Securities and Exchange Commission delayed approval of prediction-market ETFs, and a Massachusetts court signaled support for that state's effort to enforce its sports betting ban against Kalshi. On April 24, 2026, Maryland Governor Wes Moore issued an executive order prohibiting state employees from using nonpublic government information on prediction-market platforms. Sweepstakes operators are facing a separate squeeze: the D.C. Council's draft Internet Gaming and Consumer Protection Act, debated May 5, would ban dual-currency sweepstakes platforms in the district.

What It Means for the Industry

For state-licensed sportsbook operators, the AG letter is the most coordinated political pushback yet against federally regulated competitors that operate nationwide without state licensing, geofencing exceptions aside, and without state tax. For prediction-market operators, the immediate legal position remains protected by the Third Circuit and Tennessee rulings, but the CFTC rulemaking is now the central battleground: if the Commission narrows the definition of "gaming" or carves sports out of permissible event contracts, the model contracts within Kalshi, Polymarket, and similar venues are exposed. A circuit split is in motion, and Supreme Court review of CEA preemption over state gambling law is the likely endgame. For operators serving U.S. users from offshore, the same federalism arguments cut against any claim that federal acceptance of one model legitimizes another; state enforcement priorities are visibly hardening.

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