Key Takeaways:
States argued sports-related prediction markets function as wagers, not federally regulated derivatives.Kalshi court wins have raised the stakes for preemption in state gambling enforcement nationwide.Attorneys general warned CFTC oversight could weaken protections for addiction, integrity, and insiders.“Traditional sports bets and sports-related event contracts offered on designated contract markets (‘DCMs’) have no meaningful differences.”
The coalition argued that a new label does not change the underlying transaction. Bettors still risk money on uncertain sports outcomes for possible payouts.
Federal Court Fights Raise Stakes for Kalshi ContractsThe attorneys general also challenged whether sports contracts qualify as swaps under the Commodity Exchange Act. They said swaps must involve events tied to financial, economic, or commercial consequences. Game results and player statistics, they argued, do not create the kind of measurable economic exposure that derivatives are designed to hedge. Expanding federal derivatives law to cover sports betting, the letter warned, would move a traditional state-regulated activity into CFTC control.
The states warned that expanded federal oversight could weaken protections built around gambling risks. Their letter cites licensing rules, minimum age limits, voluntary exclusion programs, suspicious activity reporting, and restrictions meant to protect sports integrity. The attorneys general said the CFTC’s framework is built for financial markets, not gambling harms such as addiction, financial distress, and improper wagering by insiders or sports participants. The letter states:
“States have the expertise, experience, and tools to regulate sports betting as they have for more than a century.”
The letter was signed by attorneys general from Ohio, Nevada, New Jersey, New York, Tennessee, Utah, Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Nebraska, New Mexico, North Carolina, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Vermont, Virginia, and Wisconsin. The District of Columbia also joined.
