CFTC Sues Rhode Island, Marking Seventh State Targeted Over Prediction Market Regulation

The Commodity Futures Trading Commission filed suit against Rhode Island on Thursday, escalating a widening federal-state legal battle over who holds the authority to regulate prediction market platforms such as Kalshi and Polymarket.

The lawsuit marks the seventh time the CFTC has taken a state to court in the ongoing jurisdictional dispute, which now involves 18 states in total.

Rhode Island Attorney General Peter Neronha sued Kalshi and Polymarket last week, contending that the companies' sports-related event contracts violated the state's sports-betting statutes — an argument several other states have also advanced.

The CFTC counters that event contracts fall under its exclusive oversight authority as swaps and derivatives, and that state-level enforcement actions improperly encroach on federal jurisdiction.

"CFTC-registered exchanges have faced an onslaught of lawsuits seeking to limit Americans' access to event contracts and undermine the CFTC's sole regulatory jurisdiction over prediction markets," CFTC Chairman Michael Selig said in a statement. "This power grab ignores the law and decades of precedent."

President Donald Trump added his voice to the debate in a social media post on Tuesday, calling it critical that the commission's exclusive jurisdiction over prediction market regulation be maintained.

Of the 18 states currently involved in litigation over prediction markets, one — Minnesota — has moved to ban the platforms outright.

The political contours of the CFTC's enforcement pattern have drawn attention. While the states challenging prediction markets span both parties, the CFTC has directed its lawsuits exclusively at states whose attorneys general are Democrats. Neronha is a Democrat.

The Rhode Island Attorney General's office did not immediately respond to a request for comment.

The conflict reflects a broader tension between state gambling regulators and federal derivatives oversight that has intensified as prediction markets have expanded into sports-adjacent event contracts — territory that state officials argue falls squarely within their existing gambling frameworks.

With 18 states now embroiled in litigation and no resolution in sight, the question of regulatory primacy over prediction markets is likely to work its way toward higher federal courts, reinforcing pressure on Congress and the CFTC to clarify the legal boundary between federal derivatives law and state gambling statutes.