44 states challenge CFTC’s proposed rule on event contracts
A coalition of 44 state attorneys general has formally opposed the Commodity Futures Trading Commission’s (CFTC) proposed rule on event contracts, arguing the agency lacks authority to regulate prediction markets. Filed Monday as the public comment period closed, the letter marks the first major pushback against the CFTC’s attempt to establish a framework for platforms offering sports‑related contracts.
Led by Ohio Attorney General Andy Wilson, the coalition contends that the draft rule “goes beyond the CFTC’s statutory powers, is in tension with the Constitution, and would otherwise be arbitrary and capricious.” The attorneys general urged the commission to withdraw and redraft the measure, stressing that sports wagers fall under state jurisdiction rather than federal derivatives regulation.
States push back on federal authority
While attorneys general from Florida, Georgia, New Hampshire, Missouri, and Texas did not sign the letter, the majority emphasised that the proposal undermines states’ historic role in regulating gambling.
“The proposal takes a sledgehammer to the states’ historic power,” the letter warned, accusing the CFTC of seeking sole authority to decide “what gambling will be permitted, where it will take place, and how it will operate.”
According to the coalition, there are three central objections, beginning with statutory authority. It claims that the Commission lacks a clear legal basis under the Commodity Exchange Act. The coalition also cites the Administrative Procedure Act, asserting that the draft rule is arbitrary and capricious. The third refers to the non-delegation doctrine. It warns that the measure would violate constitutional limits if allowed.
Jurisdictional battle intensifies
Prediction market exchanges surged in popularity last year, with volumes spiking during the 2026 FIFA World Cup. June’s data showed $12.2 billion in weekly volume, with sports contracts accounting for $5.8 billion, according to Bettors Insider.
Today’s sports contracts compete directly with traditional sportsbooks, attracting casual bettors who have become habitual traders. States dispute that these contracts are similar to traditional sports bets. But the CFTC insists they qualify as swaps, derivatives under its perspective.
The commission has already invoked federal preemption in ongoing court battles with nine states, defending its claim to exclusive jurisdiction.
On Thursday, Rep. Dusty Johnson reinforced this position, asserting: “Derivatives are tools. They’re a means to an end. They’re not an end themselves. While products aren’t regulated on merit, they should, according to the CEA, serve a purpose, whether managing risk or surfacing useful information. They’re not wagers, and the CFTC is not a gambling regulator.” Johnson added that the Commission does not have jurisdiction over gaming regulations and that “prediction markets” should not be offering wagers.
According to the draft rule released last month, “gaming” is defined as recreational activities governed by rules and with measurable outcomes determined by skill. It also outlined possible bans on sports-related contracts. States argue that prediction markets bypass established safeguards such as licencing, consumer protections, age restrictions, responsible‑gambling programmes, and taxation.
Broader legal arguments
Court rulings across the country have set important examples when dealing with prediction markets. But those decisions often yield divergent results. Last April, the Third Circuit Court of Appeals upheld federal preemption in Kalshi’s case against New Jersey. Yet a Michigan judge in June prohibited platform Kalshi from offering sports bets in the state, while a federal judge in Minnesota on Monday temporarily blocked a statewide ban on prediction markets from taking effect Saturday.
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