The federal government sued Arizona on Thursday over its lawsuit against the prediction market platform Kalshi.
The Commodity Futures Trading Commission says Arizona and two other states overstepped.
In court filings against Arizona, Connecticut and Illinois, the commission says only the federal government can regulate prediction market sites like Kalshi and Polymarket.
Attorney General Kris Mayes filed criminal charges against Kalshi in March, claiming the company was going against the state’s betting laws. Mayes had no comment on the new filing.
President Donald Trump’s pick to head the commission said last month that he would back the prediction sites in any legal battle brought against them by states.
Any decision could impact the Trump family, as the President’s son, Donald Trump Jr., is a strategic adviser for Kalshi and has invested in Polymarket through his venture capital firm.
All three states have sent cease and desist orders to such companies accusing them of engaging in illegal online gambling under state law. Arizona also filed criminal charges last month against Kalshi for allegedly violating state gambling laws and a law that makes betting on elections illegal.
“The CFTC will continue to safeguard its exclusive regulatory authority over these markets and defend market participants against overzealous state regulators,” CFTC Chairman Michael S. Selig said in a written statement. He said Congress “rejected such a fragmented patchwork of state regulations” because it led to increased risk of fraud and poor consumer protection.
Last month, the Trump administration threw its support behind the operators Kalshi and Polymarket in a critical legal battle that could have implications for how sports betting is regulated.
Connecticut Attorney General William Tong on Thursday accused the Trump administration of “recycling industry arguments” that have been rejected in district courts across the country.
“These contracts are plainly unlicensed illegal gambling under time-worn state law, and we will aggressively defend Connecticut’s commonsense consumer protection laws,” he said.
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