CFTC and State Regulators Clash Over Prediction Market Authority

The United States Commodity Futures Trading Commission and various state regulators are locked in a legal dispute over who possesses the authority to police prediction market platforms. The federal regulator asserts that event contracts on registered exchanges fall under its exclusive jurisdiction via the Commodity Exchange Act.

State attorneys general contest this claim, arguing that contracts tied to sports constitute unlicensed wagering. They maintain that federal preemption of these markets violates the Tenth Amendment, which preserves the right of states to regulate sports betting. This conflict has significant economic implications for Native American gaming economies and established casinos.

Recent judicial outcomes have created a fragmented legal landscape. The U.S. Court of Appeals for the Third Circuit ruled in favor of the platform Kalshi against New Jersey, but Kalshi continues to face appeals in the Second Circuit. With pending cases in the Ninth and Second Circuits, legal experts anticipate a circuit split that would likely force the Supreme Court to intervene, potentially issuing a final ruling by June 2027.