Rhode Island Is Now State Number Seven

The CFTC filed suit against Rhode Island on Thursday, May 29, 2026. One week earlier, Rhode Island Attorney General Peter Neronha — a Democrat — had sued Kalshi and Polymarket, alleging the companies were violating state sports-betting laws.

The CFTC's response was to sue the state back.

CFTC Chairman Michael Selig called it a "power grab" that "ignores the law and decades of precedent," according to a CFTC press release cited by CNBC. Neronha fired back: "Federal intervention in this lawsuit doesn't change that. We are confident in our case."

Rhode Island is the seventh state the CFTC has sued. According to CNBC, 18 states total are now engaged in litigation over prediction markets. Minnesota went furthest — Governor Tim Walz signed a law imposing criminal penalties for operating prediction markets, according to CoinDesk.

Trump Weighs In — By Name

On Tuesday, May 26, President Trump posted on Truth Social calling it "critically important" that the CFTC maintain "exclusive authority" over prediction markets, according to CoinDesk. He didn't stop there.

"We cannot have SCUM like Chris Christie, Letitia James, Tim Walz, and JB Pritzker setting the rules!" he posted.

Illinois Governor J.B. Pritzker punched back on Bluesky: "The most corrupt President in our nation's history wants to make sure states like ours can't regulate prediction markets so his family and administration can keep profiting."

Neither side has produced evidence of direct Trump family financial benefit from prediction markets. The optics have drawn attention, though the question receives limited scrutiny from media outlets.

The CFTC's Internal Purge

The New York Times published an investigation — summarized by KuCoin's newsdesk, sourcing ChainGPT — finding that career CFTC staff who raised red flags about Polymarket, Crypto.com, and a Gemini affiliate were suspended, placed on administrative leave, or pushed out entirely.

Two officials who questioned the activity were reportedly on leave by late 2025. Three other employees tied to crypto enforcement faced similar actions.

Those officials had flagged concerns about consumer protections, fraud controls, and whether a Gemini affiliate had completed required regulatory review. According to the NYT investigation as summarized by KuCoin, then-acting CFTC Chair Caroline Pham and senior counsel Brigitte Weyls later helped the firms proceed anyway.

The internal message, per staff interviewed by the NYT: "Don't cause trouble."

The White House denied any conflicts of interest. Spokesman Davis Ingle told the NYT: "There are no conflicts of interest."

Enforcement Is Basically Dead Inside the Agency

The NYT investigation also found the CFTC dropped at least five crypto probes under the current administration and filed only two crypto enforcement cases — both against individual small-time operators, NOT major platforms.

The same agency is now aggressively suing seven states to protect those major platforms.

The Gemini Connection

The CFTC and Gemini jointly asked a judge to erase a $5 million Biden-era penalty. The case is now drawing scrutiny because of the political money trail.

According to Engadget, Tyler and Cameron Winklevoss each donated $1 million in bitcoin to Trump's 2024 election campaign. The $5 million fine Gemini already paid is not being returned — the CFTC confirmed that. But the agency still wants the consent order, including a permanent injunction, vacated.

Engadget noted it as "the latest example of the federal government rewarding the president's allies, regardless of the genuine harms they may have caused." A $2 million campaign donation from the same brothers whose company is getting a favorable enforcement reversal is documented fact.

What's Actually Legal Here?

The core dispute comes down to one question: Are prediction market contracts financial instruments or gambling products?

The CFTC.gov explainer spells out its position clearly — event contracts are structured as swaps, a class of derivatives under federal jurisdiction for over two decades. That is a substantive legal argument.

States like Rhode Island, New York, Illinois, and Minnesota argue these sports-tied contracts are gambling dressed up in financial language. This is also a substantive legal argument.

According to CoinDesk, the fight is already at the federal appellate court level and is likely headed to the Supreme Court.

A Pattern in Enforcement

CNBC noted that while authorities fighting the CFTC include officials from both parties, the CFTC has only sued states with Democratic attorneys general.

If federal jurisdiction is the principled legal position, applying it only to Democratic-led states creates a selective enforcement pattern.

Impact

If you trade on Kalshi or Polymarket — or want to — the federal government is pursuing litigation with your state to keep those platforms running. Whether that's good or bad depends on whether you think these are legitimate financial tools or repackaged sports betting.

The people inside the CFTC who raised concerns got removed from their positions. That matters to anyone focused on how financial regulation operates.