CFTC Moves To Join Kalshi’s Suit Against Rhode Island, Claiming That The Commission Has Exclusive Jurisdiction Over Prediction Markets

On May 28, 2026, the U.S. Commodity Futures Trading Commission (“CFTC”) moved to join a lawsuit filed by prediction market company Kalshi against Rhode Island concerning the state’s “imminent” attempts “to prevent Kalshi from offering event contracts for trading[.]”

Kalshi is a federally designated derivatives exchange where people can trade on the outcome of real-world events, known as “event contracts.”  As Kalshi explains it, event contracts are a “type of asset class that gives investors the ability to make trades on their opinions about a specific yes/no question.”  For example, someone who thinks the GDP will increase this quarter might buy “yes” contracts for that market.  Such contracts can be entered into for virtually any topic, including sports, elections, pop-culture, and economics.

Kalshi’s lawsuit was precipitated by a meeting with Rhode Island’s Attorney General and his staff, who “made clear that [they] believe that Kalshi’s federally regulated offerings do not comply with Rhode Island gaming laws.”  According to Kalshi, “[a]n enforcement action by Rhode Island designed to prohibit Kalshi from offering contracts that federal law permits would intrude on the comprehensive federal scheme for regulating designated exchanges.”  The CFTC agrees, arguing in its intervention motion that event contracts offered by CFTC-regulated designated contract markets such as Kalshi—”including event contracts where the underlying event relates to sports”—are “swaps” under the Commodity Exchange Act and are therefore “subject to the CFTC’s exclusive jurisdiction.”

Shortly after Kalshi filed its lawsuit, Rhode Island filed its own suit in state court, seeking, inter alia, an injunction to prevent Kalshi and Polymarket, another prediction market, from operating in the state.  According to the state’s press release on the matter, “[t]here is no substantive difference between sports betting and ‘events contracts’” on either platform.  Sports betting is a huge revenue stream for Rhode Island, bringing in $2.8 billion in revenue since it was legalized in 2019.  Rhode Island argues that prediction markets impact this revenue, and that “these platforms offer those susceptible to problem gambling unfettered access, increasing the potential for the devasting effects of gambling addiction.”

Rhode Island is hardly alone in its attempt to crack down on prediction markets.  Sixteen states so far are involved in legal proceedings with these markets.  The CFTC has sued six states to defend its claimed exclusive jurisdiction, recently winning a preliminary injunction in Arizona to stop it from pursuing criminal charges against Kalshi.  In April, the U.S. Court of Appeals for the Third Circuit found that New Jersey cannot enforce its gambling laws on prediction markets.

While these battles are in the early days, it is likely that the fate of prediction markets will eventually be determined by the U.S. Supreme Court.