The CFTC (Commodity Futures Trading Commission) has taken Arizona, Connecticut and Illinois to court over action taken against federally registered prediction market operators. The agency says CFTC prediction markets fall under its exclusive authority under the Commodity Exchange Act. The move sets up another chapter in the debate over how prediction markets should be supervised in the US.

• The lawsuits were filed on 2 April, with the CFTC challenging steps taken by the three states against designated contract markets registered with the federal agency. The regulator said those venues were offering lawful event contracts under existing federal law. It argued that states cannot block or separately regulate those markets where Congress has already given the CFTC authority.
• In its statement, the CFTC said a single national framework is the right model for commodity derivatives markets. It said that approach avoids a state-by-state system that could create different rules for the same product. For the agency, that point is central to how CFTC prediction markets should operate across the US.
• CFTC chairman Michael S. Selig said the regulator would defend that position in court. “The CFTC will continue to safeguard its exclusive regulatory authority over these markets and defend market participants against overzealous state regulators,” he said. He added that Congress had already rejected a fragmented system because it could weaken consumer protection and increase the risk of fraud and manipulation.
• The regulator also pointed to its ongoing policy review of prediction markets. It recently issued an Advanced Notice of Proposed Rulemaking to address how existing rules apply to these products and where clarity is needed. The agency also referenced its long-standing oversight, dating back to the recognition of event contracts in 1992 and expanded authority granted after 2008.

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