A legal dispute over the regulation of prediction markets has intensified after the Commodity Futures Trading Commission (CFTC) moved to block Rhode Island from enforcing state gambling laws against federally regulated exchanges.
The federal agency announced that it had filed legal action in the US District Court for the District of Rhode Island, seeking to intervene in an ongoing case involving prediction market operators. The move came shortly after Rhode Island launched its own legal challenge against prediction market platforms Kalshi and Polymarket.
According to the CFTC, Rhode Island’s actions conflict with federal authority over event contracts, which the agency classifies as commodity derivatives subject to regulation under the Commodity Exchange Act.
“CFTC-registered exchanges have faced an onslaught of lawsuits seeking to limit Americans’ access to event contracts and undermine the CFTC’s sole regulatory jurisdiction over prediction markets. This power grab ignores the law and decades of precedent,” said CFTC Chairman Michael S. Selig.
Rhode Island Case Triggers Federal Intervention
Rhode Island Attorney General Peter Neronha sued Kalshi and Polymarket last week, claiming sports-related event contracts offered by the companies violate state sports-betting laws. The state also sought significant civil penalties against prediction market operators.
In public remarks, Neronha called on prediction market firms to “stand down” and “disgorge their profits.”
The CFTC responded with a motion to intervene and a separate complaint against the state. The agency maintains that the Commodity Exchange Act preempts state efforts to regulate designated contract markets.
The dispute follows similar legal battles involving Arizona, Connecticut, Illinois, New York, and Minnesota. Rhode Island is the seventh state targeted by the CFTC in litigation tied to prediction markets.
National Debate Continues
The CFTC maintains that event contracts serve legitimate financial purposes and remain subject to federal oversight.
“Event contracts allow businesses and individuals to hedge event-driven risks, enable investors to manage portfolio exposure, and provide the public with information about the outcome of future events. These products are commodity derivatives and squarely within the CFTC’s regulatory remit. As I’ve said before, the CFTC has the expertise and responsibility to defend its exclusive jurisdiction over commodity derivatives, and that’s exactly what we’ll do,”Selig said.
Across the country, 18 states are involved in legal proceedings related to prediction markets, while Minnesota has sought to ban them. President Donald Trump recently stated that preserving the commission’s exclusive jurisdiction over prediction market regulation is important.
The industry has also faced scrutiny following allegations that Google employee Michele Spagnuolo earned $1.2 million by using inside information on contracts tied to the most searched person in 2025.
Rhode Island officials remain committed to their case.
“We allege that Kalshi and Polymarket are operating outside of our sports betting laws, and ultimately, Rhode Islanders will be footing the bill for their actions. Federal intervention in this lawsuit doesn’t change that,”Neronha said in a statement. “We are confident in our case and are ready to go on behalf of Rhode Islanders.”
Source:
“CFTC Sues to Block State Enforcement in Rhode Island Amid Ongoing Efforts to Preserve Jurisdiction”, cftc.gov, May 28, 2026
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