The lawyer who got Kalshi legalized in 2024 is now at the Department of Justice, suing three states to protect the prediction market industry.

Yaakov Roth, principal deputy assistant attorney general, filed federal lawsuits Thursday against Illinois, Arizona and Connecticut to block state gambling regulators from touching CFTC-registered prediction markets. Illinois Gov. J.B. Pritzker is named as a defendant.

What The Feds Are Arguing

CFTC Chairman Mike Selig said the agency would “defend market participants against overzealous state regulators” and warned against a “fragmented patchwork” of state-by-state rules.

The core claim: event contracts on platforms like Kalshi, Polymarket and Crypto.com are federal derivatives, not sports bets.

The complaints argue that state cease-and-desist orders make it impossible for exchanges to comply with the CFTC’s requirement to provide “impartial access” to all participants nationwide.

If a state bans the contract, the exchange can’t fulfill its federal mandate.

This is the first time the CFTC has directly sued states over prediction market jurisdiction.

Why DraftKings And Flutter Are Watching

The outcome of these cases may reshape the competitive landscape for DraftKings Inc. (NASDAQ:DKNG) and Flutter Entertainment (NYSE:FLUT).

A federal court ruling affirming CFTC preemption could open prediction markets in all 50 states.

DraftKings launched its Predictions platform in late 2025 and called it the most compelling growth opportunity since PASPA’s repeal.

Analysts estimate prediction markets could generate $10 billion in gross revenue with margins between 60% and 80%, well above DraftKings’ sportsbook margins.

If states prevail, the patchwork of restrictions may benefit incumbent licensed sportsbooks. If the CFTC wins, the competitive threat from Kalshi and Polymarket could intensify for both DKNG and FLUT.

Conflicts Of Interest

Donald Trump Jr. currently advises both Polymarket and Kalshi, and Trump Media has its own prediction market ambitions.

Meanwhile, bipartisan pressure is building from the other direction. Sen. Adam Schiff (D-Calif.) and Sen. John Curtis (R-Utah) introduced the “Prediction Markets are Gambling Act” last week, which would ban sports event contracts entirely. This joins a list of other bills looking to regulate prediction markets.

The Ninth Circuit hears oral arguments April 16 in the consolidated Nevada case involving Kalshi, Robinhood Markets Inc. (NASDAQ:HOOD) and Crypto.com.

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