TLDRThe CFTC and the Department of Justice filed a lawsuit against Illinois over its action against prediction markets.Federal regulators argue that the Commodity Exchange Act gives the CFTC exclusive authority over event contracts.Illinois sent cease-and-desist letters to platforms including Kalshi, Robinhood, and Crypto.com in 2025.The CFTC claims that event contracts qualify as federally regulated derivatives rather than state-regulated gambling products.The complaint names Governor J.B. Pritzker, Attorney General Kwame Raoul, and the Illinois Gaming Board as defendants.The U.S. Commodity Futures Trading Commission (CFTC) and the Department of Justice (DOJ) have sued Illinois over its action against prediction markets. The federal agencies filed the complaint in the Northern District of Illinois on April 2. They argue that Illinois violated federal law by sending cease-and-desist letters to several platforms.Federal Complaint Challenges State Authority Over CFTC and Prediction MarketsThe CFTC and DOJ named Governor J.B. Pritzker, Attorney General Kwame Raoul, and the Illinois Gaming Board as defendants. They claim Illinois regulators intruded on exclusive federal authority under the Commodity Exchange Act. The complaint states that federal law preempts state gambling rules in this area.Illinois regulators sent cease-and-desist letters to Kalshi, Robinhood, and Crypto.com in April 2025. The board treated sports and political event contracts as unlicensed sports wagering. In January 2026, regulators warned Polymarket and other operators about illegal gambling risks.The CFTC argues that event contracts qualify as derivative instruments under federal law. The filing states, “Event contracts are derivative instruments that enable parties to trade on their predictions.” It adds that those events may relate to economics, elections, climate, or sports.The agency claims it holds exclusive jurisdiction over swaps and event contracts traded on registered markets. It argues that state gambling laws cannot apply to platforms operating within that federal structure. Federal officials describe the lawsuit as the first direct preemption case brought by the CFTC against a state.Litigation Expands as States Target Prediction MarketsSeveral states have taken action against prediction market operators. Nevada’s Gaming Control Board secured a temporary restraining order against Kalshi. A hearing in that matter is scheduled before the Ninth Circuit.Appellate courts in the Third, Fourth, and Ninth Circuits are reviewing related preemption disputes. The CFTC plans to appear in a consolidated Ninth Circuit case involving the North American Derivatives Exchange, Kalshi, and Robinhood. Those proceedings address similar jurisdictional questions.In December 2025, Coinbase filed its own suit against Illinois officials. The case, Coinbase v. Raoul et al., seeks a declaratory judgment on federal preemption grounds. Illinois lawmakers have also introduced House Bill 5059 and Senate Bill 4168, targeting prediction platforms.CFTC Chairman Brian Quintenz outlined the agency’s position in February 2026. He stated that the CFTC would “no longer sit idly by” while states challenged its jurisdiction. He also said potential challengers “will see you in court.”The DOJ joined the April 2 complaint, signaling federal enforcement interest. Federal agencies have issued warnings about insider trading on prediction platforms. They are also conducting investigations into suspicious trading tied to political and economic events.Platforms such as Kalshi and Polymarket have reported billions of dollars in trading volume. The CFTC states that it has overseen similar markets for more than two decades. The Illinois case now proceeds in federal court as related appeals continue in other circuits.The post CFTC and DOJ Sue Illinois Over Prediction Market Crackdown appeared first on Blockonomi.