The Commodity Futures Trading Commission (CFTC) filed an amicus brief on Monday in the Ninth Circuit Court of Appeals, asserting that it alone has the authority to regulate prediction markets in the United States and that state-level efforts to oversee the industry are unlawful.
The brief was filed in North American Derivatives Exchange v. State of Nevada, a case in which federally registered exchanges are challenging state gaming regulators who argue that event contracts, particularly those tied to sports outcomes, are a form of gambling subject to state law.
“This power grab ignores the law and decades of precedent,” CFTC Chairman Michael S. Selig said. “Event contracts allow businesses and individuals to hedge event-driven risks, enable investors to manage portfolio exposure, and provide the public with information about the outcome of future events. These products are commodity derivatives and squarely within the CFTC’s regulatory remit.”
Federal vs. state authority
The agency’s legal argument rests on the Commodity Exchange Act, which broadly defines “commodity” and grants the CFTC exclusive jurisdiction over derivative instruments. The CFTC first recognised event contracts in 1992 through the Iowa Electronic Markets, which allowed trading on presidential election outcomes. Congress later expanded the agency’s authority following the 2008 financial crisis through the Dodd-Frank Act.
The Nevada Gaming Control Board filed a civil enforcement action on the same day as the CFTC’s brief, seeking to stop what it calls unlicensed wagering. Utah Governor Spencer Cox has been among the most vocal critics. “These prediction markets you are breathlessly defending are gambling, pure and simple,” Cox said.
Courts have reached different conclusions. In Massachusetts, an appeals court granted prediction market operator Kalshi a stay on Monday allowing it to continue offering contracts during an expedited appeal. In Nevada, a federal judge had previously denied a similar request for Crypto.com, ruling that sports outcomes may not qualify as the kind of “events” covered by federal swap regulations.
The filing represents a reversal from the prior administration’s CFTC, which had proposed rules in 2024 to ban political and sports-related contracts. Under Selig, the agency has defended the industry against state regulation.
Selig published a companion op-ed in the Wall Street Journal on Sunday. “The CFTC will no longer sit idly by while overzealous state governments undermine the agency’s exclusive jurisdiction,” he wrote.
The Ninth Circuit’s eventual ruling could set a precedent for whether prediction markets are treated as regulated financial products or state-governed gambling across the country.
