CFTC tells appeals court states cannot regulate prediction markets as gambling

The U.S. Commodity Futures Trading Commission [CFTC] has escalated its fight with state regulators over prediction markets, arguing in a new federal appeals court filing that states cannot treat federally regulated event contracts as illegal gambling products.

In an amicus brief filed on 12 May in KalshiEx LLC v. Schuler, the agency told the Sixth Circuit Court of Appeals that prediction markets fall under the CFTC’s “exclusive jurisdiction” because they qualify as swaps under the Commodity Exchange Act [CEA].

The filing directly challenges efforts by Ohio and several other states to restrict sports-related event contracts offered by prediction market platform Kalshi.

“The CFTC will not allow overzealous state governments to undermine the agency’s longstanding authority over these markets,” CFTC Chairman Michael S. Selig said in a statement accompanying the filing.

CFTC says event contracts are federally regulated swaps

At the center of the dispute is whether sports prediction contracts should be treated as gambling products or federally regulated financial derivatives.

The CFTC argued that contracts tied to the outcome of sports games qualify as “swaps” because payouts depend on the occurrence or outcome of an event with potential economic consequences.

The agency warned that allowing states to apply gambling laws to these contracts would undermine decades of federal commodities regulation.

The filing noted that event contracts tied to elections, weather, bankruptcies, interest rates, and other outcomes have traded under CFTC oversight for years.

According to the agency, sports-related contracts are simply the latest evolution of that market.

States and prediction markets remain on collision course

The brief forms part of a broader legal battle between the CFTC and multiple state regulators attempting to block prediction market platforms.

The agency said states, including Arizona, Connecticut, Illinois, New York, and Wisconsin, have attempted to interfere with federally regulated event contracts.

Ohio regulators previously argued that Kalshi’s sports contracts amounted to unlawful sports betting under state law.

The CFTC rejected that interpretation, arguing that only the federal regulator can determine whether such contracts violate public-interest standards under commodities law.

The agency also warned that allowing state-by-state regulation could destabilize national derivatives markets and create conflicting legal standards across the country.

The case is being closely watched across both traditional finance and crypto markets, especially as prediction platforms gain popularity around sports, elections, macroeconomic data, and digital assets.

Final Summary

• The CFTC told a federal appeals court that states cannot regulate prediction markets as gambling because event contracts fall under federal swaps law.
• The case could shape the future of sports prediction markets and broader crypto-linked event trading platforms in the U.S.