CFTC Intervenes in Rhode Island Over Prediction Markets

On May 28 the Commodity Futures Trading Commission filed to intervene in federal court to stop Rhode Island from applying state gambling laws to CFTC‑registered prediction markets and to block state civil penalties the agency says federal law preempts.

The filing follows a complaint by a designated contract market after Rhode Island threatened enforcement and sought penalties. The CFTC argues event contracts traded on registered platforms fall under the Commodity Exchange Act and remain under federal oversight, and that state gambling statutes cannot be used to regulate or punish federally registered markets.

Rhode Island joins other states that have challenged or questioned the CFTC’s authority over prediction markets, including Arizona, Connecticut, Illinois, Minnesota and New York. More than 40 states have raised concerns or supported measures that challenge federal preemption claims. State officials have argued that event-based contracts can resemble sports wagering and should be subject to local gambling and consumer-protection rules.

In an agency statement, CFTC Chairman Michael S. Selig wrote, “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.” The CFTC asked the court to bar Rhode Island from enforcing its gambling laws against the registered market while the legal dispute continues.

Federal courts have addressed related cases. In April a federal appeals court upheld an injunction against New Jersey, finding that federal law likely preempts state gambling enforcement when applied to federally regulated prediction-market operators. The CFTC has increased its involvement in market-integrity enforcement, including support for a federal insider-trading case tied to prediction-market activity.

On Truth Social, former President Donald Trump argued the CFTC should keep exclusive authority over prediction markets and warned that conflicting state rules could fragment the sector. He also linked oversight of prediction markets and bitcoin to U.S. competitiveness in emerging financial technologies.

The federal court will decide whether the Commodity Exchange Act preempts state gambling enforcement against CFTC-registered platforms and will consider the CFTC’s request to intervene, the designated contract market’s complaint, and Rhode Island’s enforcement claims.