CFTC files amicus brief to keep prediction markets federally regulated

Abi Bray

18 February 2026 at 6:17am UTC-5

Michael Selig Source: US Nuclear Regulatory Commission, Public domain, via Wikimedia Commons

Email, LinkedIn, and more

The Commodity Futures Trading Commission has filed an amicus brief in federal court regarding states’ rights to regulate prediction markets.

Chairman of the Commodity Futures Trading Commission, Michael Selig, published an op-ed in the Wall Street Journal earlier in the week, stating that it is the Commission, not individual states, that has the authority to determine whether prediction markets constitute illegal gambling.

Article continues below ad

He added that the Commodity Futures Trading Commission would step in to defend prediction markets against the 50 active court cases currently across the US.

“The CFTC will no longer sit idly by while overzealous state governments undermine the agency’s exclusive jurisdiction over these markets by seeking to establish statewide prohibitions on these exciting products,” he wrote.

He added that event contracts “serve legitimate economic functions.” Additionally, the platforms trade “swaps” under current Commodity Futures Trading Commission rules rather than act as gambling, with Selig stating that the contracts were beneficial for both Americans and the market.

Article continues below ad

Selig made a statement on social media platform X, stating that the Commodity Futures Trading Commission will see people who choose to challenge its authority in court.

It follows recent federal legislation introduced by Nevada Representative Dina Titus, which aims to prevent prediction markets across the US from offering sports event contracts.

Selig stated that the amicus brief would be filed with the Ninth Circuit Court of Appeals and would support Crypto.com in a dispute with the Nevada Gaming Control Board.

Abi Bray brings strong researching skills to the forefront of all of her writing, whether it’s the newest slots, industry trends or the ever changing legislation across the U.S, Asia and Australia, she maintains a keen eye for detail and a passion for reporting.

View Abi Bray's bio and articles.

Locations:

Verticals:

Sports Betting

Sectors:

Topics:

Dig Deeper

The Backstory

How a jurisdiction fight burst into federal court

Federal authority over prediction markets has been building toward a test, and the latest legal volley arrives as states and sports stakeholders challenge the scope of the Commodity Futures Trading Commission’s power. The core dispute turns on whether event contracts are swaps regulated by the CFTC or gambling products that fall to states. Over recent months, exchanges and regulators have traded lawsuits, injunctions and policy letters that together explain why the Commission is now asserting exclusive jurisdiction in court and signaling it will defend that position nationwide.

Prediction markets let users trade contracts tied to real-world outcomes, including sports. The sector has pushed into gray areas that state gambling laws were not designed to address, while federal derivatives rules have evolved to contemplate event-based contracts as swaps. The boundary has blurred as platforms list sports markets, regulators test their reach and leagues and colleges warn of integrity risks. That collision of frameworks helps explain why the CFTC is moving to cement its role and why courts are becoming the venue of choice to resolve it.

State crackdowns set the stage

Several states have acted against exchanges listing sports event contracts, arguing the products are unlicensed sports betting. One flashpoint is Maryland, where Kalshi sued the Maryland Lottery and Gaming Control Commission after receiving a cease-and-desist order. In its complaint, the New York firm argues its sports contracts are peer-to-peer swaps under federal law and field-preempted from state gambling oversight. Kalshi is seeking preliminary and permanent injunctions and declaratory relief that the state’s move conflicts with Congress’ derivatives framework. The filing follows similar skirmishes in other jurisdictions and a short string of court wins that emboldened the platform. Read more on Kalshi’s lawsuit against Maryland’s regulator.

Kalshi has argued in multiple venues that its markets sit squarely under the CFTC’s umbrella and that state prohibitions intrude on federal turf. The company points to recent rulings granting temporary or preliminary relief that allowed operations to continue while courts weigh the merits. In Tennessee, for example, a preliminary injunction followed a cease-and-desist from the sports betting regulator, underscoring the legal uncertainty around which agency has the last word. Maryland’s case now gives a federal court a chance to scrutinize where swaps end and sports wagering begins, and whether a state may reclassify CFTC-supervised contracts as gambling.

State regulators have also stepped up public warnings. Nevada, New Jersey and Massachusetts have been among those asserting that sports event contracts are wagering. In Nevada, the gaming board has clarified it views the products as betting even if listed on federally regulated exchanges. That stance has pushed exchanges to seek judicial clarity and accelerated the federalism clash. Against that backdrop, the CFTC’s move to weigh in more directly signals an intent to create national consistency before a patchwork of state actions hardens into de facto policy.

Colleges and leagues press integrity concerns

Parallel to the jurisdictional fight, the NCAA and major leagues have urged tighter guardrails. NCAA President Charlie Baker asked the CFTC to suspend collegiate sports prediction markets until stronger safeguards are in place. He warned that fast-growing markets tied to college competitions threaten student-athlete welfare and competitive integrity, and he cited platforms’ plans to list transfer portal outcomes as an area needing federal intervention. More on the appeal is in Baker’s request for a CFTC suspension of college markets.

Leagues have echoed similar concerns. The NBA told the acting CFTC chair that prediction markets could expand into player props, officiating decisions and injury-related outcomes, heightening integrity risks that differ from wagers overseen by state sportsbook regulators. The league drew a line between its support for legal sports betting, which faces state scrutiny, and event contracts that, in its view, lack a dedicated supervisory structure inside the CFTC. The NBA also asked to engage on potential rules if the Commission allows the contracts to continue. Details are in the league’s letter summarized in the NBA’s warning on prediction integrity.

Those interventions raise the stakes for the CFTC. If colleges and leagues convince regulators or courts that current oversight is insufficient, the Commission could be pressured to craft sport-specific protections or to limit what types of contracts can be listed. Conversely, if federal courts validate the swaps framework for event markets, leagues may seek tailored compliance obligations through rulemakings or settlement agreements with exchanges to address data integrity, insider information and market surveillance.

New entrants test the CFTC pathway

Even as litigation and policy letters mount, new players are seeking federal approval rather than state sportsbook licenses. ProphetX has applied to register as both a designated contract market and a derivatives clearing organization, positioning itself as the first regulated U.S. exchange and clearinghouse built for sports-based event contracts if approved. The company is pitching an institutional-style request-for-quote parlay mechanism as a core innovation and expects a multiyear review through 2026. The filing highlights industry bets that a federal derivatives route can legitimize sports outcomes trading and offer clearer national rules. See more in ProphetX’s dual CFTC application.

Incumbents from crypto and fantasy sports are also positioning for federally supervised offerings. Kraken’s $100 million purchase of the CFTC-licensed Small Exchange gives it a U.S.-native derivatives venue and, according to the company, a springboard into prediction markets. The deal sits alongside moves by other firms, including a National Futures Association approval tied to a PrizePicks affiliate and a revived CFTC application from a sports betting exchange seeking designated contract market status. The activity suggests companies see more upside in a uniform federal framework than in navigating 50 state gambling regimes. Context is in Kraken’s acquisition of a CFTC-licensed exchange.

This wave of applications pressures the CFTC to define the boundaries of permissible sports event contracts, surveillance expectations and customer protections. If the Commission articulates a clear compliance lane, capital and product development are likely to follow. If it hesitates or narrows the scope, firms may pivot back to state-regulated sportsbooks or offshore venues, fracturing liquidity and leaving policy gaps.

What the legal crosscurrents mean next

The mounting state actions, college and league warnings, and entrants pursuing CFTC licensure created a tipping point for federal intervention. By asserting exclusive jurisdiction, the CFTC is trying to avoid a mosaic of state prohibitions that would splinter markets and limit oversight to local rules. For exchanges, a federal imprimatur could unlock national scale and consistent compliance, but it also invites stricter market integrity and consumer protection obligations traditionally applied to derivatives venues.

Court outcomes will shape the next phase. If judges accept that sports event contracts are swaps on designated exchanges, state regulators will have less room to police them as gambling. That would validate strategies like Kalshi’s and encourage pending applicants such as ProphetX and institutional players like Kraken to accelerate launches. If courts side with states or narrow the definition of permissible contracts, much of the growth thesis could shift back to sportsbooks or stall pending new legislation.

Either way, stakeholder pressure is unlikely to abate. The NCAA and pro leagues want firmer guardrails, especially around player-centric or integrity-sensitive propositions. States want to protect tax bases and consumer protections built for sportsbooks. And platforms want legal certainty to invest. The CFTC’s willingness to step into court reflects not just a defense of jurisdiction but a bet that a unified federal rulebook can manage those competing interests better than case-by-case state actions. The coming rulings will determine whether that bet pays off or whether Congress will be asked to draw brighter lines.