Prediction Markets Developments: State Regulators and the CFTC Await Appellate Rulings That Will Define Their Enforcement Roles

Prediction markets—markets on which participants trade contracts whose outcomes depend on the outcome of an event—have experienced staggering growth since 2024.¹ This rapid growth has drawn increased attention from both state and federal regulators. 

State gambling regulators and prediction market platforms are currently battling over whether sports event contracts are violative of state gambling laws in federal courts across the country. The prediction market platforms have sought to enjoin the regulators from enforcing state gambling laws against sports event contracts. The platforms contend that, pursuant to the Commodity Exchange Act (the “CEA”), the Commodity Futures Trading Commission (“CFTC”) has exclusive jurisdiction over sports event contracts, which preempts state gambling regulators from enforcing state laws against these contracts. Federal district courts are divided on this issue and, while several of those decisions are on appeal, no appellate court has decided the question. 

Last month, the CFTC filed an amicus brief in one of these appeals—North American Derivatives Exchange, Inc. v. Nevada, No. 25-7187 (9th Cir.).² The CFTC sided with the prediction market platforms, arguing that event contracts are “swaps” within the meaning of the CEA, and the CEA preempts state gambling laws as applied to sports event contracts traded on CFTC-registered designated contract markets (“DCMs”).³

Background

Pursuant to Section 2(a)(1)(A) of the CEA, the CFTC has “exclusive jurisdiction . . . with respect to . . . transactions involving swaps or contracts of sale of a commodity for future delivery . . . , traded or executed on a” DCM.⁴ Section 1a(47)(A)(i) of the CEA defines “swaps” to include contracts that are “dependent on the occurrence, nonoccurrence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or commercial consequence.”⁵

Relying on these provisions of the CEA, several prediction market platforms that are registered DCMs have sought to prevent state gambling regulators from applying state gambling laws to regulate sports event contracts.⁶ For example, in North American Derivatives, Crypto.com (“Crypto”) sought a preliminary injunction to enjoin the Nevada Gaming Control Board and the Nevada attorney general from pursuing civil and criminal penalties under Nevada gambling laws.⁷ Crypto argued that, because its sports event contracts are “swaps” under the CEA, the CFTC has exclusive jurisdiction.⁸ The district court found Crypto’s arguments unconvincing and denied its motion for a preliminary injunction, reasoning that Crypto’s broad definition would improperly extend the CFTC’s exclusive jurisdiction to all sports betting.⁹

Some federal district courts have similarly held that the CEA does not preempt state gambling laws,¹⁰ while others have credited prediction market platforms’ arguments that the CEA does preempt state gambling laws.¹¹ Several of these cases, including North American Derivatives, are on appeal in the Third, Fourth, Sixth, and Ninth Circuits.¹²

The Amicus Brief

The CFTC weighed in on whether the CEA preempts state gambling laws for the first time last month, by filing an amicus brief in the North American Derivatives appeal in the Ninth Circuit. The brief argued that the trading of sports event contracts on CFTC-regulated markets is subject to the CFTC’s exclusive jurisdiction and the CEA preempts other federal and state regulators from exercising authority over such contracts.¹³

The CFTC relied on the definition of “swaps” in Section 1a(47)(A) to support its assertion that it has exclusive jurisdiction over the sports event contracts at issue in North American Derivatives. Specifically, the CFTC argued that the terms “event” and “contingency” broadly encompass contracts based on “any [] quantifiable result of a sports event,”¹⁴ and that such contracts are “associated with a potential financial, economic, or commercial consequence” because sporting events “generate billions of dollars in economic activity and materially affect both regional and national markets.”¹⁵

In addition, the CFTC argued that the “exclusive jurisdiction” provision in Section 2(a)(1)(A) of the CEA preempts application of state gambling laws to events contracts, including sports event contracts traded on DCMs, as a matter of field preemption and conflict preemption.¹⁶ Field preemption occurs when “the scope of the statute indicates that Congress intended federal law to occupy the legislative field.”¹⁷ Conflict preemption occurs when compliance with both federal and state law is impossible or when state law is an “obstacle” to Congress’s purposes and objectives.¹⁸

With respect to field preemption, the CFTC contended that the “exclusive jurisdiction” provision manifests Congress’ express intent that the CEA “occupy the field” of futures and swaps traded on a DCM.¹⁹ As for conflict preemption, the CFTC contended that compliance with the CEA’s requirement to provide “impartial access” would be impossible if state law bans sports event contracts.²⁰ The CFTC also argued that imposing state-by-state local requirements would contravene Congress’s intent to impose uniform requirements on national commodity exchanges.²¹

Takeaways

• Appellate Rulings are Imminent: With appeals pending in the Third, Fourth, Sixth, and Ninth Circuits, a ruling on whether sports event contracts constitute swaps and whether the CEA preempts state gambling laws as applied to such contracts is likely imminent. Whether the appellate courts will split on these issues remains to be seen.

• Significant Consequences for Market Participants: The stakes are high for prediction market platforms. If the appellate courts determine that the CEA does not preempt state gambling laws, prediction market platforms could suffer significant financial consequences, as the majority of their trading volume is attributable to sports event contracts.²² Conversely, the gambling industry is lobbying hard to prohibit these platforms from trading sports event contracts, on the grounds that they mislead consumers, open the door to impropriety, violate state gambling laws, and “rob state budgets and tribal finances while simultaneously forcing states and tribes to expend massive legal resources to defend their sovereignty.”²³

• Increased CFTC Enforcement Ahead: Meanwhile, the CFTC is staking its claim. Since filing its amicus brief in North American Derivatives, the CFTC has taken a number of actions reaffirming its position that it retains exclusive jurisdiction to regulate these markets and signaling that it is focused on regulating prediction markets. For example, in an advisory issued less than a week after filing the amicus brief, the CFTC asserted its “full authority” to police illegal trading practices occurring on predictions market DCMs and announced two enforcement actions involving such practices.²⁴ On March 9, 2026, CFTC Chairman Michael Selig announced that he had directed staff to draft guidance on event contracts and stated that “the CFTC will be an active and vigilant overseer of these markets.”²⁵ Three days later, the CFTC issued an advisory that included specific guidance for sports event contracts traded on DCMs.²⁶

¹See The Current State of Prediction Markets, KPMG, https://kpmg.com/kpmg-us/content/dam/kpmg/pdf/2025/current-state-prediction-markets.pdf (last visited Mar. 23, 2026); see also Anastasia Chernikova, How Prediction Markets Are Becoming Financial Infrastructure (last updated Dec. 20, 2025 2:59 PM), Forbes, https://www.forbes.com/sites/digital-assets/2025/12/20/how-prediction-markets-are-becoming-financial-infrastructure/ (“Monthly trading volume in prediction markets surged from under $100 million in early 2024 to over $13 billion by the end of 2025, a more than 100-fold increase.”)

²See Amicus Brief of the Commodity Futures Trading Commission, N. Am. Derivatives Exch., Inc. v. Nevada, No. 25-7187 (9th Cir. Feb. 17, 2026) [hereinafter “Amicus Brief”].

³A DCM is a derivatives exchange that is registered by the CFTC. See 7 U.S.C. § 6.

⁴7 U.S.C. § 2(a)(1)(A).

⁵7 U.S.C. § 1a(47)(A)(ii).

⁶See, e.g., N. Am. Derivatives Exch., Inc. v. Nevada, No. 2:25-CV-00978-APG-BNW, 2025 WL 2916151 (D. Nev. Oct. 14, 2025); Kalshiex LLC v. Schuler, No. 2:25-CV-1165, 2026 WL 657004 (S.D. Ohio Mar. 9, 2026); Kalshiex LLC v. Orgel, No. 3:26-CV-00034, 2026 WL 474869 (M.D. Tenn. Feb. 19, 2026); KalshiEx LLC v. Flaherty, No. 25-cv-02152-ESK-MJS, 2025 WL 1218313 (D.N.J. Apr. 28, 2025); KalshiEX LLC v. Martin, 793 F. Supp. 3d 667 (D. Md. 2025). 

⁷2025 WL 2916151 at *4.

⁸See id.

⁹N. Am. Derivatives,2025 WL 2916151 at *9.

¹⁰See, e.g., Schuler, 2026 WL 657004 at *4-7; Martin, 793 F. Supp. 3d at 686.

¹¹See, e.g., Orgel, 2026 WL 474869 at *10.

¹²See, e.g., Flaherty, No. 25-1922 (3d Cir.); Martin, No. 25-1892 (4th Cir.); Schuler, No. 26-3196 (6th Cir.); KalshiEX, LLC v. Hendrick, No. 25-7516 (9th Cir.); N. Am. Derivatives Exch. Inc., No. 25-7187 (9th Cir.).

¹³Amicus Brief at 14-27.

¹⁴Id. at 14-18.

¹⁵Id. at 19-20.

¹⁶Id. at 21-27.

¹⁷Altria Grp., Inc. v. Good, 555 U.S. 70, 76 (2008).

¹⁸See, e.g., Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142-43 (1963); Hines v. Davidowitz, 312 U.S. 52, 66-67 (1941).

¹⁹Amicus Brief at 21-24.

²⁰Id. at 26-27.

²¹Id. at 27.

²²Dan Santaromita and Hannah Vanbiber, Are prediction markets just sports betting by another name? How legal battles are taking shape, N.Y. Times: The Athletic (Mar. 9, 2026), https://www.nytimes.com/athletic/7075799/2026/03/09/prediction-markets-sports-betting-legal-battles/.

²³Letter from Bill Miller, President and CEO, Am. Gaming Ass’n and David Z. Bean, Chairman, Indian Gaming Ass’n to U.S. Senate and House of Rep. (Jan. 12, 2026), https://www.americangaming.org/joint-aga-iga-letter-addressing-unregulated-sports-event-contracts/.

²⁴CFTC Release No. 9185-26, CFTC Enforcement Division Issues Prediction Markets Advisory (Feb. 25, 2026), available at https://www.cftc.gov/PressRoom/PressReleases/9185-26.

²⁵Michael S. Selig, Chairman, CFTC, The Next Era of American Markets Leadership at the FIA Global Cleared Markets Conference (Mar. 9, 2026), https://www.cftc.gov/PressRoom/SpeechesTestimony/opaselig2.

²⁶CFTC Release No. 9193-26, CFTC Staff Issues Predictions Markets Advisory (Mar. 12, 2026), available at https://www.cftc.gov/PressRoom/PressReleases/9193-26.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.