The Commodity Futures Trading Commission headquarters in Washington was photographed on Dec. 23, 2022.
Photo by Ting Shen, Bloomberg via Getty Images.
A coalition of 44 state attorneys general sent a letter to the Commodity Futures Trading Commission on Monday, stating that the agency lacks authority to regulate sports‑related event contracts on prediction‑market platforms.
The letter arrived as the public comment period for the CFTC’s inaugural proposed rule on prediction‑market regulation closed Monday evening, a rule that centers mainly on exchanges’ sports offerings.
“The proposed rule exceeds the CFTC’s statutory authority, conflicts with the Constitution, and, in its present form, would be arbitrary and capricious,” wrote the coalition of state attorneys general, led by Ohio Attorney General Andy Wilson. “The CFTC should restart its rulemaking and clarify that sports bets and gambling cannot be traded on designated contract markets; they should instead be subject to state law.”
Attorneys general from Florida, Georgia, New Hampshire, Missouri, and Texas did not sign the letter.
Since prediction‑market exchanges experienced a surge in trading volume last year—largely fueled by sports‑related contracts—the states and the CFTC have been engaged in a jurisdictional dispute. The upcoming 2026 FIFA World Cup further boosted platform volumes.
The CFTC, together with prediction‑market platforms, contends that all event contracts constitute swaps—derivatives subject to CFTC regulation. Nonetheless, states maintain that sports‑related contracts resemble sports betting, falling within their jurisdiction.
In June, the commission issued an initial draft of its proposed rule governing prediction markets, placing particular emphasis on the contentious sports‑related event contracts and indicating which might be prohibited.
The draft also introduced a definition of “gaming” as an activity undertaken for recreation or entertainment, governed by rules and based on measurable outcomes achieved through skilled participation.
In a separate letter to the CFTC, derivatives marketplace CME Group contested this definition. “By defining ‘gaming’ as the sport itself rather than the financial wagering on the sport, the CFTC’s definition suggests the Commodity Exchange Act is preempting state sports regulations, which constitutes a striking overreach,” CME general counsel Jonathan Marcus wrote.
The CFTC has invoked federal preemption in U.S. court filings to assert its exclusive authority over prediction‑market regulation, and it is currently litigating against nine states to uphold that claim.
Although CME has concerns about federal regulation of sports‑related event contracts, it serves as the CFTC‑regulated venue for FanDuel’s sports‑prediction marketplace.
In contrast, prediction‑market platform Rothera—launched in June—argued that the commission should adopt the “gaming” definition, emphasizing that it pertains to the activity itself.
Thomas Chippas, CEO of Rothera, wrote in a letter to the commission that a definition based on wagering or risking value would, as the commission acknowledges, encompass every event contract, and that Rothera opposes any definition tied to wagering.
Industry observers generally expect the Supreme Court to ultimately decide who regulates sports‑related event contracts, while interim court rulings continue to shape the status of prediction‑market offerings.
These rulings have produced divergent outcomes: a Michigan judge in late June barred platform Kalshi from offering sports bets in the state, and a federal judge in Minnesota on Monday temporarily halted a statewide ban on prediction markets that was set to take effect Saturday.
Disclosure: CNBC and Kalshi have a commercial relationship that includes customer acquisition and a minority investment.
