The Commodity Futures Trading Commission (CFTC) has filedlawsuits against Arizona, Connecticut, and Illinois, accusing them ofinterfering in markets under federal jurisdiction. The regulator claims thestates acted unlawfully by attempting to restrict or regulate designatedcontract markets (DCMs) that operate under CFTC approval.Singapore Summit: Meet the largest APAC brokers you know (and those you still don't!)Federal Jurisdiction DisputeAccording to the CFTC, the Commodity Exchange Act (CEA)grants it exclusive authority to oversee event contracts, which allow tradingbased on outcomes such as elections or company performance. The lawsuits aim toreaffirm that state regulators have no power to impose separate rules or banson such activities.“The CFTC will continue to safeguard its exclusiveregulatory authority over these markets and defend market participants againstoverzealous state regulators,” said Chairman Michael S. Selig. He added thatCongress rejected fragmented state oversight to prevent inconsistent standardsand greater risk of fraud.The new lawsuits extend a campaign that CFTC Chair Michael Selig started earlier this year to defend prediction markets from state-level challenges. In February, he said the agency had filed an amicus brief in ongoing cases and warned that state regulators “will see” the CFTC in court as it seeks to assert what he calls its exclusive jurisdiction over event contracts.I have some big news to announce… pic.twitter.com/3OBNTaOnIL— Mike Selig (@ChairmanSelig) February 17, 2026Clarifying the Regulatory FrameworkThe commission recently issued an Advanced Notice ofProposed Rulemaking to address confusion surrounding the application of federalrules to prediction markets. The CFTC officially recognized event contracts in1992 through the Iowa Electronic Markets and gained expanded authority afterthe 2008 financial crisis.The legal actions seek to reinforce a unified federalapproach and protect market operators from conflicting state regulations thatcould disrupt the growing prediction market sector.Selig’s position marks a shift from the agency’s earlier attempts to shut down political and event‑based markets run by platforms such as Polymarket and Kalshi. Courts pushed back against parts of that crackdown, and after Donald Trump returned to the White House and replaced the CFTC’s leadership, the commission dropped those cases and withdrew a proposal that would have imposed broad restrictions on political and sports prediction markets.A key CFTC official said the agency will use its powers to root out insider trading in prediction markets https://t.co/UillsoQ2f2— Bloomberg (@business) April 1, 2026The CFTC has also clarified that prediction market contracts fall under derivatives rules, not gambling laws, and that insider trading regulations fully apply. In his first public comments as Enforcement Director, David Miller said it is “wrong” to assume insider trading does not apply to these markets, stressing that firms must treat event-based trading like any other financial product when it comes to the use of non-public information.This article was written by Jared Kirui at www.financemagnates.com.