Author: Nikhilesh De
Compiled by Deep潮 TechFlow
DeepOcean Summary: Are sports prediction contracts "gambling" or "swaps"? Last week, Dodd, Gensler, the NFL, and 39 states jointly filed amicus briefs with the Supreme Court, most siding with state authority; on Friday, the CFTC released an interim final rule and a new proposal to explicitly classify sports, political, and other event contracts as swaps—Kalshi’s deadline to respond has been extended to November 9.
Last week, multiple parties filed amicus briefs with the U.S. Supreme Court urging it to take up a case concerning whether sports-based prediction market contracts qualify as swaps. On Friday, the Commodity Futures Trading Commission (CFTC) released two proposals— one of which is now effective—outlining its position on the matter.
Former Senator Chris Dodd, former CFTC and SEC Chairman Gary Gensler, the National Football League (NFL), 39 states (and the District of Columbia), 145 tribal nations, and other parties filed amicus briefs with the Supreme Court urging it to take the case; many of them argued that sports-based prediction market products are not swaps and should not be regulated by the CFTC.
Why is it important?
This newsletter discussed a month ago the possibility of the Supreme Court intervening in prediction markets. That assessment has not changed; now, a significant circuit split has emerged: two appellate courts have ruled that prediction markets involving sports are in fact gambling products regulated by individual states, while another appellate court has ruled they fall under the CFTC’s jurisdiction.
Break down
Last week’s amicus briefs largely urged the Supreme Court to side with the states, ruling that at least sports-related prediction markets are effectively gambling products and should be regulated at the state level rather than the federal level.
Former Senator Chris Dodd—who lends his name to the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act at the heart of this debate—stated in his opinion that the law was never intended to grant the CFTC authority to override state governments and strip them of their power to regulate gambling.
This opinion disagrees with the Third Circuit Court of Appeals panel’s 2-1 ruling that the CFTC has jurisdiction over swaps and prediction markets covering sports, asserting a distinction between derivatives as financial instruments and sports betting.
“Parlays—bets that combine multiple wagers, often on different games, cities, and sports, involving point spreads or player performance—do not facilitate hedging or price discovery,” the opinion wrote, citing a popular category of sports-related prediction markets. “Nor do they ‘relate to’ the ‘potential financial, economic, or commercial consequences’ that the Commodity Exchange Act (CEA) requires for swaps.”
Dodd's memo subsequently challenged the CFTC's claim of "exclusive jurisdiction" over these products.
“The ‘exclusive jurisdiction’ granted to the CFTC by the Commodity Exchange Act is not an express preemption clause that exempts every contract listed on a designated contract market (DCM) from otherwise applicable state and tribal laws; it merely designates the CFTC as the federal regulator for covered financial instruments,” the opinion stated.
Gary Gensler, former CFTC chair who played a key role in drafting and implementing the Dodd-Frank regulatory framework, has also argued that the law does not grant the CFTC authority superior to state gambling laws. He made a similar argument in a related appeal case.
The NFL argues that, given the importance of sports betting in—well, sports—it has a vested interest in the outcome of this case. The league criticizes what it calls the CFTC’s “laissez-faire” stance on this issue, as well as the broader inconsistency: how states regulate betting operators differs from how the CFTC regulates designated contract markets (the type of license held by prediction market operators).
On Friday, the CFTC proposed a temporary final rule and a separate proposal aimed at clarifying how it incorporates these products into the definition of “swaps.” The agency stated that casino-style gambling is not included within its swap definition, but event contracts remain within scope. Regulators also seek to formally include sports, political, cultural, and weather-related events as event contracts classified as swaps.
Kalshi applied for and was granted an extension to file its response with the Supreme Court. The new deadline is November 9, 2026.
This week
- This week, we did not track any congressional hearings.