US sues Illinois to stop its regulation of prediction markets
By Jonathan Stempel
April 2 (Reuters) - The Trump administration sued Illinois on Thursday, in a move to stop what it called the state's unlawful efforts to regulate prediction markets because they may violate state gambling laws.
According to a complaint filed in Chicago federal court, Illinois' attempt to shut down so-called designated contract markets regulated by the Commodity Futures Trading Commission intruded on the federal government's exclusive authority to regulate national swaps markets.
The lawsuit is the first by the CFTC to block state gaming regulators from policing operators of prediction markets.
It cited cease-and-desist letters that the Illinois Gaming Board sent to Kalshi, Polymarket and Crypto.com, after the board found reason to believe they violated state gambling laws by allowing unlicensed sports wagering. The financial services company Robinhood HOOD.O received a similar letter.
Illinois Governor JB Pritzker, state Attorney General Kwame Raoul and the gaming board were named as defendants. None immediately responded to requests for comment.
Event contracts let people trade based on the predicted outcomes of various events, such as sports and elections.
Though Illinois and most other U.S. states, as well as Washington, D.C., have legalized sports betting, many states and tribal gaming authorities have sought to exclude prediction markets.
The federal government said the Illinois defendants "misapprehend" the nature of event contracts by calling them "wagers" instead of swaps, enabling the gaming board to regulate and license companies that offer the contracts. Allowing such regulation violates the U.S. Constitution, the government said.
"Defendants’ attempt to regulate these DCMs interferes with plaintiffs’ exclusive authority to uniformly regulate and monitor this congressionally defined market," the complaint said.
"This court should put an end to the ongoing efforts by defendants to undermine the uniform application of federal law," it added.
The lawsuit seeks to prevent Illinois from enforcing its sports wagering law against CFTC-regulated providers of event contracts.
