Key Highlights

  • A coalition of 44 state attorneys general, led by Ohio Attorney General Andy Wilson, told the CFTC it lacks statutory power to regulate sports related event contracts on prediction market platforms.
  • The letter arrived as the public comment period closed on the CFTC's first proposed rule targeting prediction markets' sports offerings.
  • CME Group separately challenged the CFTC's proposed definition of gaming, arguing it suggests federal preemption of state sports regulations.
  • The CFTC is currently in litigation with nine states over its claimed exclusive jurisdiction, with a Michigan judge blocking Kalshi's sports bets while a Minnesota judge temporarily blocked a statewide prediction market ban.

States Push Back as CFTC Comment Period Closes

A coalition of 44 state attorneys general wrote to the Commodity Futures Trading Commission arguing that the agency lacks the statutory authority to regulate sports related event contracts offered on prediction market platforms. The letter, led by Ohio Attorney General Andy Wilson, arrived as the public comment period for the CFTC's first proposed rule on prediction market regulation expired, with the measure focused primarily on exchanges' sports offerings.

The coalition argued the proposed rule exceeds the CFTC's statutory powers and would be arbitrary and capricious in its current form, calling on the commission to restart its rulemaking process and explicitly clarify that sports bets and gambling fall under state law rather than federal designated contract markets. Notably, attorneys general from Florida, Georgia, New Hampshire, Missouri and Texas did not sign the letter, highlighting some divergence even among state-level officials on the issue.

A Jurisdictional Battle Fueled by Explosive Volume Growth

The dispute between states and the CFTC has intensified since prediction market trading volumes surged last year, driven substantially by the popularity of sports related contracts, with the 2026 FIFA World Cup pushing platform volumes to new records. The CFTC and prediction market platforms maintain that all event contracts qualify as swaps, a derivative category falling under the commission's regulatory authority, while states argue that sports-related contracts closely resemble traditional sports betting, an activity that falls within their own jurisdictional authority.

The CFTC's June draft proposal focused heavily on these controversial sports-related contracts, including outlining which types might ultimately face prohibition, and introduced a definition of gaming that CME Group directly disputed. CME general counsel Jonathan Marcus argued that defining gaming as the sport itself, rather than the financial wagering placed on it, effectively suggests the Commodity Exchange Act preempts state sports regulations, a characterization Marcus described as a striking overreach.

Diverging Views and Diverging Court Outcomes Complicate the Picture

Not all industry participants share CME's concerns about the proposed definition. Rothera, a prediction market platform that launched in June, argued the CFTC should adopt the gaming definition specifically because it anchors regulation to the activity itself rather than to wagering broadly. Rothera CEO Thomas Chippas warned that a definition keyed to wagering or risking something of value would sweep in every event contract, a outcome the company opposes.

The CFTC has invoked federal preemption in litigation against nine states seeking to defend what it views as exclusive jurisdiction over prediction markets, though court outcomes so far have been inconsistent. A Michigan judge blocked platform Kalshi from offering sports bets in the state in late June, while a federal judge in Minnesota temporarily blocked a statewide prediction market ban from taking effect. Industry observers widely expect the Supreme Court will ultimately need to resolve which regulatory body holds final authority over sports-related event contracts.

Conclusion

The growing coalition of state attorneys general pushing back against CFTC authority underscores how unsettled the regulatory landscape remains for sports-related prediction markets, even as trading volumes continue climbing. With diverging court rulings already emerging in Michigan and Minnesota, and CME Group and Rothera taking opposing positions on how gaming should be defined, the path toward regulatory clarity appears likely to run through extended litigation rather than swift administrative resolution. Whether the Supreme Court ultimately settles the jurisdictional question may determine how sports-related event contracts are regulated nationwide for years to come.