Feds sue three states over prediction market crackdowns

The U.S. Commodity Futures Trading Commission on Thursday sued three states — Arizona, Connecticut and Illinois — for what what it calls "unconstitutional and invalid" applications of state anti-gambling laws to prediction markets.

Why it matters: These cases could determine who really regulates companies like Kalshi and Polymarket, which have raised billions of dollars from venture capitalists

• Sportsbooks also are paying close attention, including those that already have launched prediction markets in states where their "traditional" betting apps are banned.

Zoom out: Prediction markets currently operate under CFTC licenses, often having bought them from original licensees.

The bottom line: This is the latest fissure between state attorneys general (of both parties) and the federal government when it comes to regulating tech companies, following fights over both AI and antitrust enforcement.

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