A16z urges CFTC to preempt state prediction-market bans as agency sues five states
The firm warned state-by-state geofencing would conflict with fair-access rules and thin liquidity in event contracts.
Andreessen Horowitz has formally backed the CFTC’s push to keep prediction markets under federal oversight, warning that state-by-state restrictions are already impairing access. The stance lands as the CFTC escalates the jurisdiction fight in court against five states, raising near-term headline risk for U.S. platform availability and liquidity.
Key Takeaways
- Andreessen Horowitz submitted an 18-page comment letter to the CFTC supporting federal oversight of prediction markets.
- State cease-and-desist letters and proposed bans were described as a “serious barrier to impartial access” for users.
- The CFTC sued Illinois, Arizona, Connecticut, New York, and Wisconsin in the past month, arguing the states are acting outside their jurisdiction.
- Polymarket and Kalshi’s combined cumulative lifetime volumes crossed $150 billion in April 2026.
A16z Enters the Prediction-Market Jurisdiction Fight With an 18-Page CFTC Letter
Andreessen Horowitz (a16z) moved from sidelines commentary to direct regulatory advocacy on May 1, submitting an 18-page comment letter to the Commodity Futures Trading Commission backing the agency amid a wave of state-level actions against prediction-market platforms.
The firm’s core claim is market-structure, not ideology. State-by-state restrictions, including cease-and-desist letters and proposed bans, are already creating a “serious barrier to impartial access” for users. For traders, that translates into a practical risk: thinner participation and worse execution in U.S.-sensitive contracts if access becomes a patchwork.
The timing matters because the dispute is no longer a set of isolated state skirmishes. With the CFTC actively litigating and a16z publicly supporting the agency’s authority, the fight is hardening into a federal preemption test that can reshape who gets to trade what, and where.
CFTC vs States: Five Lawsuits and the Swaps-vs-Gambling Dispute
In the past month (as of May 1), the CFTC filed lawsuits against Illinois, Arizona, Connecticut, New York, and Wisconsin, arguing the states are acting outside their jurisdiction by attempting to regulate markets overseen by the federal government.
At the center is classification. CFTC Chair Mike Selig has asserted prediction markets’ event contracts qualify as swaps, placing them under the agency’s “exclusive jurisdiction.” If that interpretation holds in court, it strengthens the CFTC’s argument that state regulators and attorneys general are overreaching when they frame the same products as gambling.
States have pushed back on that framing, arguing platforms such as Kalshi and Polymarket offer unlicensed gambling products. That swaps-versus-gambling dispute is the hinge point because it determines whether states can force local compliance regimes on what the CFTC views as federally regulated derivatives.
Geofencing Risk: a16z Says State-by-State Blocking Conflicts With Fair-Access Rules
a16z’s letter targets the mechanical consequence of state fragmentation: geofencing, or blocking users based on their state of residence. The firm argued that requiring exchanges to block U.S. users by state conflicts with the CFTC’s rules on fair access to markets.
The liquidity argument is explicit. “Being forced to deny impartial access to users in states that seek to license or prohibit certain event contracts will likely severely circumscribe available liquidity,” a16z wrote.
That matters more now because these venues are no longer niche. Polymarket and Kalshi’s combined cumulative lifetime volumes crossed $150 billion in April 2026. As participation scales, access rules stop being a compliance footnote and start functioning like a liquidity switch, especially for contracts where U.S. flow is a meaningful share of the book.
Court Dockets, State Actions, and CFTC Signals That Could Shift Access
Near-term direction is likely to come from court calendars, not product roadmaps. Any rulings, injunctions, or procedural milestones in the CFTC’s lawsuits against Illinois, Arizona, Connecticut, New York, and Wisconsin could quickly change the incentive for platforms to geofence or keep nationwide access.
The second catalyst is whether additional states issue cease-and-desist letters or propose bans targeting prediction-market platforms. More state actions increase the odds that platforms choose conservative access changes, including state blocks, contract restrictions, or delistings that would show up first as softer liquidity.
Finally, traders should watch for CFTC statements or guidance that further define when event contracts qualify as swaps under the agency’s “exclusive jurisdiction.” Clearer federal language can tighten the preemption case, while ambiguity keeps platforms exposed to a state-by-state compliance grind.
How Traders Should Read the CFTC Preemption Push
I treat this as a market-access story first and a policy story second. The scale is now large enough that a forced geofencing regime would not just inconvenience users, it would fragment order flow and degrade price discovery in the contracts that matter most to U.S. participants.
The threshold that matters is whether courts and the CFTC can make the “swaps” classification stick in a way that constrains state gambling enforcement. If that holds, the setup starts to look structural rather than narrative-driven, and prediction-market liquidity becomes more resilient to local political cycles.
