The divided early results in the sports prediction market lawsuits—with States prevailing on the vast majority of early rulings (15 out of 19) before the recent backslide (i.e., losses in Tennessee, Arizona and the Third Circuit)—can best be explained by the divergent paths that the courts have taken in analyzing whether the Commodity Exchange Act preempts state sports gambling laws with respect to sports-event contracts listed on CFTC-regulated exchanges such as Kalshi’s. The courts that have preliminarily ruled in Kalshi’s favor have focused narrowly on whether sports-event contracts qualify as “swaps” under the CEA’s broad definition, while courts siding with the states applied clear-statement rules like the presumption against preemption in determining that Congress did not clearly authorize prediction markets on sporting events.
Key to Kalshi’s recent success is their broad framing of the “relevant field” for preemption purposes as “trading on DCMs” (designated contract markets) rather than “sports gambling.” The courts that have sided with Kalshi have used the “swaps” issue as the starting point of their preemption analysis, first determining that sports-event contracts are “swaps” under the CEA because the outcomes of sporting events have potential financial consequences, and, then having concluded that sports-event contracts are “swaps,” conveniently defining the “relevant field” for federal preemption purposes as “contracts traded on DCMs” which allows the court to conclude that state gambling laws are field-preempted due to the CFTC’s exclusive jurisdiction over swaps.
The Third Circuit’s recent decision in KalshiEx, LLC v. Flaherty is emblematic of this approach. In Flaherty, the Third Circuit majority began its preemption analysis by assessing whether Kalshi’s sports-related event contacts were “swaps” under the CEA. The Court determined that Kalshi’s sports-related event contracts were “swaps” because they “depend on event outcomes associated with economic consequences.” Because they were “swaps,” the majority found that the district court “properly defined the scope of field preemption as the regulation of trading on a DCM (a form of futures trading) rather than as gambling (a broader and traditionally state-regulated field).”
The Third Circuit’s field preemption analysis relies on an inverted, circular methodology. Controlling precedent requires a court to define the relevant field first—and define it narrowly based on the targeted aim of the state law—before evaluating the pervasiveness of the federal scheme. Under this judicially mandated approach, the inquiry must begin with the actual field targeted by the States: sports gambling. The Third Circuit inverted that order — construing the federal law first to determine that sports-event contracts are swaps and then defining the field as “trading swaps on DCMs” (to align with its interpretation of federal law). The Third Circuit paradoxically referred to “trading on DCMs” as the “narrow” (and therefore legally proper) “field” and “sports gambling” as the “overly broad” (and therefore legally impermissible) “field” when it is actually the other way around since states are only challenging a subset of contracts traded on DCMs—sports event contracts.
The Third Circuit’s ‘swaps-first’ approach to field preemption has filtered down to other federal courts. In granting the CFTC a temporary restraining order barring the Arizona Attorney General’s Office from pursuing either criminal or civil enforcement actions against Kalshi in state court, U.S. District Judge Michael T. Liburdi stated that he “agrees with and adopts the Third Circuit’s view that if event contract are swaps under the Act, . . . the scope of field preemption is the regulation of trading on a DCM.”
Despite this clear (and predictable) trend, states are still unwisely beginning their legal arguments with the “swaps” issue, which is at best a 50/50 jump ball. Instead, they should be front-loading the strong presumption against preemption that applies when a traditionally state-regulated field such as gambling is involved. This presumption, coupled with the presumption against implied repeals (which considers the existence of other federal laws addressing sports gambling, such as the Wire Act and IGRA), serves as a more natural starting point for the preemption analysis and represents the states’ strongest argument against federal preemption of their sports gambling laws.
Another way for States to re-shift the focus back to sports gambling is to employ a third clear-statement principle—the “major-questions” doctrine. The major-questions doctrine is a principle of statutory interpretation requiring “clear congressional authorization” when an administrative agency claims the power to regulate a matter of “vast economic and political significance.” This principle ensures that extraordinary powers transforming an agency’s authority are never granted through vague or ambiguous statutory language.
The CFTC’s unheralded and transformative expansion of its regulatory authority to encompass sports gambling—a multi-billion-dollar industry that has historically been regulated by the states and which falls well outside of the agency’s traditional wheelhouse of technical expertise (i.e., commodity futures contracts and derivatives markets)—hits on all the key elements of the major-questions doctrine. In addition, the agency’s reliance on a broadly worded and long-extant statutory definition (whether it be “swaps,” “commodities,” or “excluded commodities”) that makes no reference to sports gambling (or even to sporting events in general) falls well short of the “clear congressional authorization” required to justify such a broad and sweeping expansion of the CFTC’s regulatory authority, particularly in light of: (1) the Supreme Court’s decision in Murphy v. NCAA, which reaffirmed the States’ authority to regulate sports gambling where Congress does not “directly” regulate that activity; and (2) other federal statutes (namely, the Wire Act and PASPA) which reflect Congress’ longstanding policy of disfavoring sports gambling.
Sports betting has vast economic and political significance
Courts generally consider an agency action to be of “vast economic significance” if its financial impact is in the “billions of dollars.” In Alabama Ass’n of Realtors v. HHS, the Supreme Court held that a $50 billion impact was sufficient to trigger the major-questions doctrine. Similarly, the Fifth Circuit in BST Holdings, L.L.C. v. OSHA found that even $3 billion in compliance costs met this threshold, necessitating the doctrine’s application.
Sports betting in the United States easily clears this threshold. The amount wagered legally on sports in the U.S. since the Professional and Amateur Sports Protection Act (PASPA) was overturned eight years ago has eclipsed a half trillion dollars. During that time, state-regulated sports betting operators have combined to generate almost $60 billion in revenues on a total handle of $651 billion, contributing nearly $12 billion in tax payments to state treasuries taxes. In 2025 alone, state-regulated sports gambling generated $16.96 billion in gross revenues on a total handle of $166.94 billion, according to the American Gaming Association.
Prediction markets are likewise experiencing explosive growth, with total trading volume reaching nearly $64 billion in 2025, up from under $16 billion in 2024, driven heavily by sports-related event contracts which make up over 80% of this volume. The U.S. market for sports-related event contracts is on track to reach approximately $1.1 trillion in annual trading volume by 2030, according to Bank of America.
Beyond those staggering figures, the regulation of sports gambling is politically and historically significant. In enacting PASPA, Congress clearly thought sports gambling was a matter of “vast economic and political significance” that required landmark legislation. Indeed, as the 1991 Senate Judiciary Committee Report preceding PASPA’s passage proclaimed, “Sports gambling is a national problem.” The Senate Report catalogues what the Committee believed were some of the problems arising from sports gambling, including the threat to “the integrity of, and public confidence in, amateur and professional sports.” The Committee asserted that “[w]idespread legalization of sports gambling would inevitably promote suspicion about controversial plays and lead fans to think ‘the fix was in’ whenever their team failed to beat the point-spread.”
The Committee was “especially concerned” about the potential effect of legalized sports gambling on “America’s youth,” noting that of the approximately 8 million compulsive gamblers in the U.S. at the time, 1 million of them were under 20 years old. The Committee was worried that young people would find “new technologies” that promoted sports gambling “highly seductive,” while making the activity “more convenient for children” to participate in. The Committee cautioned that “governments should not be in the business of encouraging people, especially young people, to gamble.”
The Supreme Court has likewise acknowledged the vast political and historical significance of sports gambling legalization. In Murphy v. NCAA, the Supreme Court acknowledged that the public is divided on “the controversial subject” of sports gambling, with supporters touting legalization as a revenue-producer for the States and opponents pointing to the heightened risk of gambling addiction and perceived threat to the integrity of professional and collegiate sports.
Acknowledging these competing policy concerns, the Supreme Court declared in Murphy that “the legalization of sports gambling requires an important policy choice,” but stressed that “the choice is not ours to make. Congress can regulate sports gambling directly, but if it elects not to do so, each State is free to act on its own.”
Following the Supreme Court’s landmark decision in Murphy, 39 states and the District of Columbia have enacted legislation to legalize and regulate sports wagering within their respective borders, granting approximately 60 percent of the United States population access to a state-regulated sportsbook.
Despite being freed from the clutches of PASPA, our two largest states, California and Texas, continue to maintain existing state-law prohibitions against sports gambling, as have nine other states on both sides of the political spectrum. During the November 2022 general election, California voters decisively rejected competing sports wagering initiatives in one of the most contentious ballot measures in the state’s political history. This landmark contest, which garnered the highest cumulative expenditures in U.S. history, exceeding $460 million, further highlights the profound political divide surrounding the contentious issue of sports gambling legalization.
Kalshi relies on several “long-extant statutes”—including those enacted in 1974 and 2000 (and not just Dodd-Frank)—to assert that the CFTC has exclusive jurisdiction over sports-event contracts
During the Ninth Circuit oral argument, presiding judge Ryan Nelson expressed concern that the 2010 Dodd-Frank Act, which granted the CFTC exclusive jurisdiction over “swaps,” might be too recent to satisfy the “long-extant statute” requirement of the major-questions doctrine.
During a colloquy with Nevada’s counsel, Judge Nelson suggested that Kalshi, Robinhood and Crypto.com were traveling solely under the Dodd-Frank Act in asserting that the CFTC has exclusive jurisdiction over sports-event contracts:
“I don’t think they’re arguing that this crept in any earlier than 2010. So, it’s not exactly like this has been some dormant power that came in with the Grain Act of 1912. This is something that came in with the Dodd-Frank amendment in 2010. It’s not entirely clear that this fits within that bailiwick or not because, at minimum, we’re talking about something that’s existed for a decade, not hundreds of years that somebody just brushed off the dust of some old regulation or statute, and said ‘Oh, let’s try this.’”
(Oral Argument, at 1:23:58 to 1:25:09).
Judge Nelson’s concerns are unfounded, as Kalshi and its confederates—Robinhood, Coinbase, and the CFTC—are not relying solely on the 2010 Dodd-Frank Act update to substantiate their claim that the CEA empowers the CFTC to regulate betting on the outcomes of sporting events.
Their court filings in multiple jurisdictions assert that the CFTC’s authority emanates from three sources of law: (1) the 1974 amendments to the CEA, which granted the CFTC exclusive jurisdiction to regulate commodities and futures on designated exchanges; (2) the Commodity Futures Modernization Act of 2000 (“CFMA”), which extended the CFTC’s jurisdiction to cover “excluded commodities,” which are defined in the CFMA as an “occurrence” or “contingency” that is “beyond the control of the parties” to the transaction and “associated with a financial, commercial, or economic consequence”; and (3) the 2010 Dodd-Frank Act, which extended the CFTC’s exclusive jurisdiction to encompass “swaps,” which are similarly defined as “contracts providing for payment . . . dependent on the occurrence, nonoccurrence, or to the extent of the occurrence of an event or contingency associated with a potential financial, economic, or commercial consequence.” Indeed, Kalshi and Robinhood have represented to multiple courts that their sports-event contracts are both “excluded commodities” and “swaps.”
1. The CFTC Act of 1974
Kalshi has repeatedly asserted in court filings that the “[t]he text of the 1974 amendments to the CEA could hardly be clearer. Congress established the CFTC and granted it ‘exclusive jurisdiction’ over all ‘accounts,’ ‘agreements,’ and ‘transactions involving swaps or contracts of sale of a commodity for future delivery’ that are ‘traded or executed on a contract market designated’ by the CFTC.” Since the 1974 amendments granted the CFTC “exclusive jurisdiction” over all on-exchange transactions, Kalshi argues that its event contracts are necessarily covered by this broad grant of exclusive jurisdiction: “Kalshi’s event contracts are traded on a contract market designated by the CFTC, and the CFTC therefore has ‘exclusive jurisdiction’ to regulate these contracts.” According to Kalshi, the 1974 amendments were designed to preempt state gambling laws for all “on-DCM” transactions. As it recently stated to the Sixth Circuit: “when Congress granted the CFTC exclusive jurisdiction over on-DCM trading in 1974, it was exceedingly clear that Congress was preempting state gaming laws as applied to those transactions.”
The CFTC has likewise characterized the 1974 amendments as creating a “sea change” in the regulation of U.S. derivatives markets by expanding the scope of the CEA to cover “all commodities” and giving the CFTC “exclusive jurisdiction” over U.S. commodity future and options markets. Importantly, the CFTC now asserts that the 1974 Act’s broad definition of “commodity” encompasses sporting events and, therefore, justifies the CFTC’s assertion of exclusive jurisdiction over sports-event contracts. Prior to 1974, the CEA’s definition of “commodity” was fairly narrow, covering only a limited number of agricultural products. The 1974 Act expanded the definition of “commodity” to include “all other goods and articles, except onions . . . and motion picture box office receipts, and all services, rights, and interests . . . in which contracts for future delivery are presently or in the future dealt in.” 7 U.S.C. §1a(9).
CFTC Chairman Michael Selig has repeatedly cited the “onions and motion picture box office receipts” exclusionary language as granting the CFTC exclusive jurisdiction over all prediction markets, including those involving sporting events. During an April 6, 2026 interview on CNBC’s “Squawk Box,” Selig specifically pointed to the “broad definition” of the term “commodity”—as amended in the 1974 Act—as empowering the CFTC to “regulate commodity derivatives and that includes events on sports, on politics and virtually everything else except for onions and motion picture box office receipts.”
In remarks made at CNBC’s Digital Finance Forum, Chairman Selig—nearly two months into his tenure as CFTC Chairman—referred to the broad definition of “commodity” in explaining why he believes that the CFTC has exclusive regulatory authority over sports-related event contracts:
Well, look, prediction markets aren’t new and the definition of commodity is extraordinarily broad. There have actually been two things expressly excluded from the definition which is onions and motion picture box office receipts. So we’ve got a lot of authority over these markets. . . . [W]hen you get into derivative instruments, when you get into binary options, which are contracts that we have exclusive regulatory jurisdiction over, when there’s a commodity involved, as I mentioned, which is a very broad definition, we have authority to regulate that.
In an amicus curiae brief filed with the Ninth Circuit in February, the CFTC elucidated the rationale behind the agency’s stance on sports-event contracts:
Importantly, when Congress has limited the Commission’s jurisdiction over derivatives it has only done so by expressly embedding narrow exclusions in the statutory commodity definition itself (i.e., onions and movie box office receipts).
Kalshi’s prediction markets partner, Coinbase, has likewise relied on the 1974 Act’s “onions and motion picture box office receipts” exclusionary language in asserting that the CFTC’s has exclusive jurisdiction over sports-related event contracts. According to Coinbase’s court filings in Connecticut and Michigan, “Congress excluded only a handful of specific underliers—including ‘onions’ and ‘motion picture box office receipts’—from the definition of ‘commodity,’ making clear that all other underliers (such as sporting events) fall within the CEA’s scope,” reasoning that the 1974 Act’s “express references to particular items imply the exclusion of others that were not singled out.”
As Coinbase’s chief legal officer, Paul Grewal, put it more succinctly on “X”:
Congress deliberately chose to exclude only a handful of specific underliers—including “onions” and “motion picture box office receipts”—from the definition of “commodity.” This makes clear that all other subjects (including sporting events) fall within the CFTC’s scope.
2. The Commodity Futures Modernization Act of 2000
Additionally, Kalshi relied on the 2000 CFMA to claim that its sports-event contracts are “excluded commodities.” As Kalshi argued to the Sixth Circuit:
The 2000 CFMA amendments are even more on-point. That year, Congress first extended the CEA to cover event contracts by defining ‘excluded commodit[ies]’ to include an ‘occurrence’ or ‘contingency’ that is ‘beyond the control of the parties’ to the transaction and ‘associated with a financial, commercial, or economic consequence.’ 7 U.S.C. § 1a(19)(iv).”
“Transactions on DCMs in excluded commodities, as with other commodities, fall within the CFTC’s exclusive jurisdiction,” Kalshi previously explained.
Kalshi’s federal court filings across the country are replete with representations that its sports-related event contracts are “excluded commodities” (a classification that was first added to the CEA in 2000).
Here’s what Kalshi told a Connecticut federal district court back in January:
The events underlying Kalshi’s contracts are “excluded commodities” because they are an “occurrence” or “contingency” that is “beyond the control of the parties” and “associated with” a financial consequence. Id. § 1a(19)(iv)(I). Courts have therefore concluded that event contracts “are subject to regulation under the CEA as ‘excluded commodities.’ KalshiEx [v. CFTC], 2024 WL 4164694, at *2 [D.D.C. Sept. 12, 2024]; CFTC v. Trade Exch. Network Ltd., 117 F. Supp. 3d 29, 37–38 (D.D.C. 2015).
In another case, Kalshi represented to an Ohio federal court—as part of an emergency motion—that its sports contracts are ‘excluded commodities’:
The events underlying Kalshi’s contracts are excluded commodities, which include any “occurrence, extent of an occurrence, or contingency . . . that is . . . beyond the control of the parties to the relevant contract, agreement, or transaction; and . . . associated with a financial, commercial, or economic consequence.” Id. § 1a(19)(iv). Event contracts like Kalshi’s are therefore futures or options in excluded commodities. KalshiEx, 2024 WL 4164694, at *2 (“Event contracts are subject to regulation under the CEA as ‘excluded commodities.’”).
Kalshi has likewise represented to federal courts in Nevada and New York that its sports contracts are regulated under the CEA as “excluded commodities”:
The events on which Kalshi’s contracts are based fall within the definition of “excluded commodity,” including any “occurrence, extent of an occurrence, or contingency” that is “beyond the control of the parties to the relevant contract, agreement, or transaction,” and “associated with a financial, commercial, or economic consequence.” Id. § la(19)(iv). . . .
Indeed, the CFTC has consistently and historically regulated event contracts as “excluded commodities.” Rule 40.11—the CFTC regulation which bans event contracts that “involve, relate to, or reference” gaming—is even titled “Review of event contracts based upon certain excluded commodities.”
The federal courts have likewise recognized that event contracts are regulated by the CEA as “excluded commodities.” In her 2024 decision upholding Kalshi’s right to offer political election event contracts, U.S. District Judge Jia Cobb declared that “[e]vent contracts are subject to regulation under the CEA as ‘excluded commodities,” citing the Special Rule statutory provision.
So, Kalshi has long known that event contracts are subject to CFTC regulation as “excluded commodities.” That knowledge carried over to Kalshi’s first lawsuit over sports-event contracts when it sued Nevada. In its initial court filing in April 2025, Kalshi acknowledged that “[t]he CFTC regulates event contracts as a type of derivative referencing an ‘excluded commodity.’”
Given its reliance on a statute that is over 25 years old (as well as a 1974 statute that the CFTC promotes as granting the agency exclusive jurisdiction over sports-event contracts), I suppose we should accept Kalshi’s assertion—recently made to a Connecticut federal court—that “event contracts,’ including ‘sports-related contracts,’ have been ‘within the CFTC’s regulatory perimeter’ for decades . . . .” The relevant statutory provisions, as per Kalshi’s representations to the federal judiciary, date back to 1974 or 2000. Either way, both qualify as “long-extant statutes” for the purposes of the major-questions doctrine. See, e.g., National Federated of Independent Business v. OSHA, 595 U.S. 109 (2022) (relevant provisions date back to 1970); West Virginia v. EPA, 597 U.S. 697 (2022) (relevant provision amended in 1990).
“Expansive, vaguely worded definitions” are not a clear congressional authorization
The more fundamental problem with the proffered statutes is that they do not “clearly authorize” the CFTC to regulate sports betting. The definitions of “swap” and “excluded commodities”—which look to whether the underlying event has actual or potential “financial consequences” – are too broadly and vaguely worded to constitute a “clear congressional authorization.”
As the Supreme Court has instructed, the major-questions doctrine requires something more than “a merely plausible textual basis” when an agency claims power to regulate matters of vast economic and political significance.
In FDA v. Brown & Williamson Tobacco Corp., the Supreme Court denied the FDA authority to regulate tobacco products under the Food, Drug and Cosmetic Act even though those products plausibly fell within that statute’s broad and expansive definitions of “drug,” “device,” and “combination products.” The Court held that those broad definitions were too “cryptic” to qualify as clear congressional authorization. As the Court explained: “[w]e are confident that Congress could not have intended to delegate a decision of such economic and political significance to an agency in so cryptic a fashion.”
Similarly, in Utility Air Regulatory Group v. EPA, the Supreme Court rejected the agency’s attempt to regulate greenhouse gases under a specific provision of the Clean Air Act just because they fell within a literal interpretation of the Act’s definition of “air pollutant.”
Likewise, in Solid Waste Agency of Northern Cook County v. U.S. Army Corps of Engineers, the Supreme Court acknowledged that certain isolated wetlands arguably fell within the literal meaning of “water of the United States” under the Clean Water Act. But that literalism, the Court instructed, was not a clear authorization for the agency to regulate those wetlands.
“Each of these cases demonstrates that an expansive, vaguely worded definition is not akin to clear congressional authorization,” the Fourth Circuit observed in North Carolina Coastal Fisheries Reform Group v. Capt. Gaston LLC. “In a major-questions case, ‘more is required before holding that the agency has been granted the asserted power,’” the appellate court added.
Congress’s longstanding policy of disfavoring sports gambling
And “more” is definitely required when it comes to setting federal policy on the “controversial” subject of sports gambling. In every instance in which Congress has addressed sports gambling, it has done so clearly and explicitly – starting with the Wire Act of 1961, which prohibits the interstate transmission of wagering information related to any “sporting event of contest” (a ban which is still in effect), and further exemplified by the Professional and Amateur Sports Protection Act, which, until its demise in 2018, prohibited state-authorized sports wagering. The Third Circuit referred to these two statutes as reflecting a “federal policy of disfavoring sports-gambling.”
Sports gambling is also specifically addressed in a number of other federal statutes, including the Sports Bribery Act, the Wagering Paraphernalia Act, and the Federal Wagering Tax Act.
When Congress wants to address sports gambling, it barges in through the front door.
It doesn’t try to sneak in a comprehensive regulatory scheme through the back door, especially given its past unwavering opposition to sports gambling.
Moreover, the claim that Congress empowered the CFTC to regulate sports gambling through the 2010 Dodd-Frank Act is fundamentally incompatible with the Supreme Court’s landmark decision in Murphy v. NCAA.
In holding PASPA unconstitutional, the Supreme Court operated under the logical premise that there was no federal statutory regime in place to regulate sports wagering. As the Court stated in the closing paragraph of Murphy:
The legalization of sports gambling requires an important policy choice, but the choice is not ours to make. Congress can regulate sports gambling directly, but if it elects not to do so, each State is free to act on its own.
Indeed, the absence of any federal scheme of regulation was central to the result in Murphy. The reason why each state was “free to act on its own” is precisely because Congress did not regulate sports gambling directly.
It would have come as a major surprise—if not an outright shock—for the parties (which included the federal government) and the Court in Murphy to discover that Congress—some eight years earlier—had already provided a federal framework for sports gambling through the 2010 Dodd-Frank Act.
The leagues and the DOJ were on the losing side in Murphy because there was no federal statutory regime in place to regulate sports wagering; just a blanket prohibition (i.e., PASPA) directed at state governments. They might have prevailed in Murphy if only they had alerted the Supreme Court to the CFTC’s exclusive jurisdiction to regulate sports-related event contracts as “swaps.”
If we’ve learned anything from over 60 years of federal policymaking on sports gambling, it’s that when Congress acts in this area, it does so clearly and explicitly—as evidenced by the Wire Act and PASPA, among other statutes. It borders on the absurd to believe that Congress would ever approve federally regulated sports wagering by implication and have it overseen by an agency which lacks the requisite subject-matter expertise, especially after devoting more than a half-century of federal policymaking to disfavoring that activity.
The legislative history of Dodd-Frank reinforces this point. During the Senate’s consideration of the Special Rule authorizing the CFTC to prohibit ‘gaming’ contracts, Senator Lincoln—who chaired the Senate Committee on Agriculture and was a leading lawmaker in the development of Dodd-Frank—stated that “[i]t would be quite easy to construct an ‘event contract’ around sporting events such as the Super Bowl, the Kentucky Derby, and Masters Golf Tournament”—but that “[t]hese types of contracts would not serve any real commercial purpose. Rather, they would be used solely for gambling.”
“That contemporaneously expressed concern makes it even less likely that Congress intended for Dodd-Frank to render obsolete state laws limiting or regulating gambling for transactions that Congress brought within the purview of the CEA pursuant to Dodd-Frank,” one court observed.
The CFTC’s past interpretations of Dodd-Frank contradict its present position
In determining whether a clear congressional authorization exists, “courts may examine the agency’s past interpretations of the relevant statute.” When an agency reverses a prior interpretation of the statute, it is less likely that Congress has clearly authorized the agency’s action. As Justice Gorsuch has stated, “a ‘contemporaneous’ and long-held [agency] interpretation of a statute is entitled to some weight as evidence of the statute’s original charge.”
The CFTC’s present view that Dodd-Frank empowers it to regulate sports-event contracts is contradicted by the agency’s previous interpretation of the statute. In 2011, the CFTC enacted Rule 40.11(a)(1), which prohibits registered entities from listing contracts involving “gaming,” “war,” “terrorism,” “assassination,” and “activity that is unlawful under State or Federal Law.”
The CFTC unanimously adopted Rule 40.11(a)(1) following Congress’s passage of the Dodd-Frank Act which added a new § 5c(c)(5)(C) to the Commodity Exchange Act (the “CEA”). Section 5c(c)(5)(C)—the so-called “Special Rule—provides that the CFTC “may determine” that certain event contracts may be prohibited from being listed or made available for clearing or trading if the CFTC determines such event contracts to be “contrary to the public interest” because they involve certain enumerated activities such as: “(I) activity that is unlawful under any Federal or State law; (II) terrorism; (III) assassination; (IV) war; (V) gaming; or (VI) other similar activity determined by the Commission, by rule or regulation, to be contrary to the public interest.”
In 2011, the CFTC exercised its discretion under Section 5c(c)(5)(C) – i.e., “may determine” – by promulgating Rule 40.11(a)(1), which sets forth a prohibition on the trading and clearing of any event contract that “involves, relates to, or references” any of the six enumerated categories.
When announcing Rule 40.11(a)(a), the CFTC stated that its “prohibition of certain ‘gaming’ contracts is consistent with Congress’s intent [in the Dodd-Frank Act] to prevent gambling through the futures markets and to protect the public interest from gaming and other events contracts.” Quoting Dodd-Frank’s legislative history, the CFTC’s adopting release “emphasized that the Commission ‘needs the power to, and should, prevent derivatives contracts that are contrary to the public interest because they exist predominantly to enable gambling through supposed event contracts.’”
As the CFTC acknowledged in Rule 40.11(a)(1), the Special Rule statutory provision (§ 5c(c)(5)(C)) reinforced Congress’s existing policy against sports betting. Indeed, Kalshi acknowledged before the D.C. Circuit that sports betting involves “gaming” and runs afoul of the categorical prohibition:
An event contract . . . involves ‘gaming’ if it is contingent on a game or game-related event. The classic example is a contract on the outcome of a sporting event; as the legislative history directly confirms, Congress did not want sports betting conducted on derivatives markets.
The Special Rule and the CFTC’s own regulation—which acknowledges Congress’s intent to “prevent gambling through the futures markets”—contradict any claim that Congress intended to legalize sports betting through Dodd-Frank. This is particularly evident given the clear congressional policy of disfavoring sports gambling demonstrated by the Wire Act and PASPA.
Mismatch between the CFTC’s assertion of power and expertise
As Justice Kagan observed in West Virginia v. EPA, “Congress does not usually grant agencies the authority to decide significant issues on which they have no particular expertise.” Stated another way, when there is a “mismatch” between the agency’s “usual portfolio” and a “given assertion of power,” courts “have reason to question whether Congress intended a delegation to go so far.”
The CFTC’s core role consists of overseeing commodity futures contracts and derivatives markets. As the agency recently acknowledged, it “is not a gaming regulator” and lacks the specialized knowledge of gaming regulators. “[I]n the United States,” the Commission has explained, “gambling is overseen by state regulators with particular expertise and governed by state gaming laws aimed at addressing particular risks and concerns associated with gambling.”
State sportsbook regulations target problem gambling, underage gambling, money laundering, and match fixing to protect consumers, preserve sports integrity, and ensure clean financial operations. State regulatory bodies, such as the Nevada Gaming Control Board and the New Jersey Division of Gaming Enforcement, enforce strict compliance across these four core areas.
The CFTC’s existing regulatory framework fails to address any of these critical issues. There are no ‘sports-specific’ regulations anywhere in the CFTC’s rulebook. The word “sports” is not even mentioned once in the Commodity Exchange Act or the CFTC’s promulgated regulations. In fact, for the past half-century—from the CFTC’s establishment in 1974 until January 2025— no sports-related contract had ever been listed or traded on a registered entity.
The absence of “sports-specific” regulations poses particular challenges in addressing sports integrity concerns. In 2024, the CFTC said it was “ill-suited” to “investigate suspected manipulation” of political event contract markets given its “historic mission and mandate.” The need to safeguard event integrity is even more pronounced with respect to sporting events, which have a well-documented history of match-fixing. However, as Major League Baseball highlighted in a March 2025 letter to the CFTC, “those protections are lacking” for sports-related event contract markets. Among other things, as the MLB letter cautioned, there are no regulations “that would require exchanges and brokers to notify leagues of potential threats to game integrity, cooperate with league investigations into player, umpire, or employee misconduct, or share data for integrity purposes.” In addition, several CFTC-registered exchanges and brokers recently told MLB that “they are not even permitted to share information with MLB under current CFTC regulations.”
The NBA also assailed the CFTC’s lack of sports-specific regulations. In a May 1, 2025 letter to the CFTC, NBA Vice President and Assistant General Counsel Alexandra Roth emphasized that the “rapid expansion of sports prediction markets has occurred in the absence of the kind of robust, sports-specific regulatory framework that would aim to protect the integrity of the games being played.” The NBA’s letter then drew an unflattering comparison to state-regulated sports betting frameworks, highlighting that the CFTC’s “broad-based financial oversight does not include the kind of sports-specific controls and protections that are the hallmark of state gambling regulations.”
Echoing MLB’s concerns about the absence of regulatorily mandated sports integrity monitoring—a key component of state sports gambling regulations—the NBA’s letter noted that the CFTC’s regulations do not compel exchanges or brokers to report potentially suspicious trades or trading patterns to the relevant sports leagues, or to even cooperate with league investigations. The letter further noted that “in contrast to the many states that have dedicated sports betting regulatory personnel, there is no CFTC division dedicated to the overarching sports-specific oversight of these new betting markets.”
The CFTC’s ability to police these markets—which are well outside its traditional wheelhouse of technical expertise—is further hampered by the severe reduction in the CFTC’s staff over the past year. According to CNN, the CFTC workforce has dropped by 24% since President Trump returned to office. The New York Times estimates the current CFTC workforce at around 550, down from over 700 full-time employees at the end of fiscal year 2024. By comparison, the Nevada Gaming Control Board employs approximately 300 people—in a state that accounts for less than one percent (1%) of the overall United States population—raising serious questions as to whether the CFTC has sufficient personnel to regulate sports-event wagering nationwide.
The CFTC is even less equipped to tackle problem gambling. Unlike state-regulated sportsbooks, the CFTC does not mandate responsible gaming protocols like self-exclusion or deposit limits. Further, the CFTC allows persons 18 and over to buy and sell sports-event contracts on CFTC-regulated exchanges. By contrast, most state sports betting frameworks require the customer to be at least 21 years of age. As one Ohio federal court recognized, “the 18-to-20 age range is particularly vulnerable to problem gambling,” and, when trading on a DCM, “is unprotected by responsible gaming laws.”
Agency intrusion into particular domain of state law
The Supreme Court has recognized that the major-questions doctrine also applies when an agency seeks to “intrude into an area that is the particular domain of state law.” “Our precedents require Congress to enact exceedingly clear language if it wishes to significantly alter the balance between federal and state power,” the Supreme Court declared in Alabama Association of Realtors v. HHS. The regulation of gambling has long been recognized as a core state police power. In the Interstate Horseracing Act of 1978, Congress found that “the States should have the primary responsibility for determining what forms of gambling may legally take place within their borders.” The DOJ concurred prior to PASPA’s passage, stating that “[i]t is left to the states to decide whether to permit gambling activities based upon sporting events.”
The CFTC’s claim of exclusive jurisdiction over sport-related event contracts nationwide—even in states that prohibit sports gambling—significantly encroaches upon an area that is the particular domain of state law—the regulation of gambling. 39 States and the District of Columbia have enacted regulatory regimes governing the conduct of sports gambling operations within their respective borders. Kalshi’s offering of sports-event contracts outside of those state regulatory regimes to persons located within the borders of those states—with many of them under the age of 21–would severely hinder those States’ ability to regulate that conduct, preserve sports integrity, and safeguard their citizens from any of the negative consequences of gambling.
The intrusion doesn’t end there. In the CFTC’s view, every sports-event contract is a “swap” because it is a contract for payment based on the outcome of a sporting event. But if that’s true, then all contracts for payment based on the outcome of a sporting event—in other words, all state-regulated sports bets—are likewise “swaps.” Section 2(e) of the CEA makes it “unlawful for any person . . . to enter into a swap” outside of a DCM. If all state-regulated sports bets are considered “swaps” and must be listed on DCMs to comply with federal law, as recently observed by Ohio federal district court judge Sarah D. Morrison, “every sportsbook in the country would be put out of business.”
A more prominent role for the major-questions doctrine?
The major-questions doctrine has received scant attention in prediction market cases nationwide, most likely due to court-imposed page limits and the need to address a wide array of legal arguments. However, as Judge Nelson highlighted, the doctrine has several prerequisites and many cases fall short. This controversy should not be one of them. The CFTC’s commandeering of sports gambling and ousting of traditional state authority to regulate that activity within state borders is tailor-made for the application of the major-questions doctrine. But a more fulsome treatment of the issue is needed. Doing so could shift the focus back to sports gambling, which, in turn, could bolster the States’ assertion of the presumptions against preemption and/or implied repeals that are heavily dependent on courts framing the case as being about sports gambling, not derivatives trading. If the relevant field is “sports gambling” (as courts in Ohio, Maryland, Massachusetts and Nevada have already determined), the States should have a clearer path to victory.
