CFTC sues Louisiana to undo court block on prediction markets

The Commodity Futures Trading Commission sued Louisiana on November 13, asking a federal court to lift a state order that shut dozens of prediction market firms out of the state. It is the 12th state the agency has sued over event contracts.

Its release, numbered 9326-26, set out the case. The agency moved one day after a state judge signed a temporary restraining order naming 31 entities tied to Kalshi, Polymarket, Robinhood, Coinbase and others. Louisiana Attorney General Liz Murrill had sued those firms on November 12. The contracts at issue now trade on apps as mainstream as Robinhood.

Event contracts let people trade on the outcome of a future event, from an election to a basketball game. The CFTC treats them as derivatives. A growing number of states call them gambling. That split is what both courts must now sort out.

The federal suit answers a state win this site reported on Saturday, when Louisiana secured the order halting those markets. The two filings sit in different courts. The same contracts are in dispute in both.

The federal case against the state

In its complaint, the CFTC wants a declaration that Louisiana's gambling laws cannot reach markets it oversees, plus an order barring the state from enforcing the restraining order. The filing is titled "Complaint for Injunctive and Declaratory Relief." The agency says the suit aims "to maintain the status quo while the federal courts decide this issue."

Chairman Michael Selig framed the products as long settled. "Event contracts have traded openly in Louisiana for years, in compliance with the Commodity Exchange Act and CFTC regulations," he said in the release. The legal theory is narrow. The Commodity Exchange Act, the agency argues, hands it exclusive authority over derivatives listed on registered exchanges, and event contracts are swaps that fall under that authority. States that treat them as gambling, on this reading, are preempted.

A fight that now spans a dozen states

Louisiana is not an outlier. The CFTC said it has filed friend-of-the-court briefs in four federal appeals courts and one state supreme court as attorneys general across the country move against event contracts. Selig promised this fight early in the year, telling states in February that the agency would see them in court, Axios reported at the time.

This pattern goes back months. The agency filed a cluster of suits against states in the spring, each making the same argument that federal registration shields these markets from local gambling rules. Most remain unresolved. The volume of litigation is the point the CFTC keeps returning to, because one appeals court ruling in its favor could settle many cases at once.

A second front opened in Arkansas. There the CFTC and the Justice Department sued to stop the state's own case against Kalshi. Arkansas Attorney General Tim Griffin had filed a 57-page complaint on November 4, accusing the platform of running unlicensed gambling on sports, elections and entertainment. "Arkansas law is concerned with substance, not semantics," Griffin wrote. Coinbase and Kalshi have defended the agency's authority in other venues this year.

Louisiana's attorney general gave no ground. Murrill pushed back on Saturday, calling Selig's account false and labeling him an "obsequious standard bearer" for Kalshi and the prediction market industry, according to The Block. Her office argues the contracts are bets dressed up as financial trades. Both sides claim the law. Neither has a ruling yet. The dispute also carries a political charge, because the Trump administration backed Kalshi and Polymarket earlier this year as states moved to restrict them.

What the companies face in the meantime

Enforcement is already biting. Judge Jeffrey Johnson signed the order the same afternoon Murrill filed, without notice to the companies, and it bars them from offering event contracts to Louisiana residents without a state license. It also requires geofencing. Kalshi has cut off its Louisiana users. The order reaches a long list, among them Robinhood, Crypto.com, Gemini, Interactive Brokers' ForecastEx, Novig and the fantasy operator Underdog. The companies are not accused of fraud. The dispute is about licensing and jurisdiction, not customer losses.

That order runs for 10 days unless a judge extends it. A hearing on a longer injunction is set for 9 a.m. local time on November 30. What happens before then is unclear. The federal court could act first, the state court could extend its order, or the two could clash. Neither the CFTC nor Louisiana has said how it would handle rulings that point in opposite directions.

What to watch

November 30 is the next fixed date, and the state hearing that day will show whether the Louisiana order hardens into a longer injunction. The federal docket matters more for the wider industry. A ruling that the Commodity Exchange Act preempts state gambling law would blunt the run of state actions in one stroke. A ruling the other way would hand states a template to copy. For now the contracts sit in a gap between two regulators who both insist they are in charge. That gap, more than any single filing, is what operators and traders are tracking.