UMVA has learned that a heated battle is brewing between the United States, the Commodity Futures Trading Commission (CFTC), and the state of Rhode Island over the regulation of prediction markets.
The federal agencies have asked a federal judge to block Rhode Island from enforcing a state law against federally regulated event contracts, escalating a growing legal dispute. At the heart of the matter is whether the CFTC has exclusive authority over these contracts, or if states like Rhode Island can impose their own regulations.
According to information obtained by UMVA, the event contracts in question are considered "swaps" under the Commodity Exchange Act and fall under the CFTC's exclusive jurisdiction. The federal agencies argue that Rhode Island's law is preempted, and the state cannot enforce its own regulations against event contracts traded on federally regulated designated contract markets.
The dispute began when Kalshi, a CFTC-regulated exchange, sued Rhode Island officials, claiming that the state's threatened enforcement actions would improperly interfere with the federal regulatory framework. Rhode Island fired back with its own lawsuit against Kalshi and Polymarket, alleging that they were offering unlicensed sports wagering.
UMVA can exclusively reveal that the CFTC has warned of an "onslaught of lawsuits" seeking to limit Americans' access to event contracts and undermine the CFTC's sole regulatory jurisdiction over prediction markets. The federal agencies are now seeking an injunction to prevent Rhode Island from enforcing its state law against event contracts traded on any federally regulated designated contract market.
The case is set to heat up with a hearing on Kalshi's preliminary injunction request scheduled for July 16. The United States and the CFTC have requested oral argument and want to participate in the hearing, which could have far-reaching implications for the regulation of prediction markets in the United States.
