WASHINGTON D.C (VINnews)-The Commodity Futures Trading Commission said it was suing Arizona, Connecticut and Illinois over WASHINGTON D.C (VINnews) – The Commodity Futures Trading Commission is suing Arizona, Connecticut and Illinois in a dispute over federal authority to regulate prediction markets, as the fast-growing betting platforms draw increasing scrutiny from lawmakers.

The agency said the lawsuits seek to affirm its exclusive jurisdiction over certain event-based contracts offered on prediction market platforms, arguing that a patchwork of state-level rules would undermine consistent federal oversight.

The legal action comes as prediction markets — which allow users to wager on outcomes ranging from elections to economic indicators — surge in popularity across the United States. Their rapid growth has raised questions on Capitol Hill about consumer protections, market integrity and whether the platforms resemble gambling more than traditional financial instruments.

Federal regulators have signaled concern that inconsistent regulation could expose participants to heightened risks, while also complicating enforcement efforts. State officials, however, have increasingly sought to assert their own authority, citing local consumer protection laws and gaming regulations.

The CFTC’s move sets up a potential legal showdown over the boundaries between federal and state oversight in an emerging sector that straddles finance and betting.

Lawmakers are expected to examine the issue more closely in the coming months as the industry continues to expand.