39 states join forces with CFTC: sports prediction market jurisdiction dispute

According to Woofun AI, the regulatory ownership of the US sports prediction market is facing unprecedented judicial and administrative challenges. The core conflict focuses on whether such contracts are gambling products subject to state jurisdiction or financial swaps at the federal level. As the Supreme Court becomes the ultimate focus of the game, the legal tug-of-war between the Commodity Futures Trading Commission (CFTC) and market players, including Kalshi, has reached a critical stage, and defining the boundaries of regulatory powers will directly reshape the entire industry's compliance framework.

Last week, a multi-stakeholder legal storm unfolded at the Supreme Court level, and its roots can be traced back to the Dodd-Frank Wall Street Reform and Consumer Protection Act passed in 2010. Former Senator Chris Dodd, former CFTC Chairman Gary Gensler, the American Football League (NFL), 39 states, the District of Columbia, and 145 tribal nations have jointly submitted amicus curiae opinions to the Supreme Court, strongly urging the court to accept the case.

Notably, although Gensler led the formulation of regulations for the Act, he and Dodd shared the same position in this case, arguing that the Act did not give the CFTC the power to overstep the state government and deprive it of its ability to regulate gambling. According to data compiled by Woofun AI, the subjects submitted this time covered a full range of forces, from legislators to industry giants. Most of the opinions tend to support state power, believing that sports-based prediction market products are not financial swaps and should not be regulated by the CFTC.

This position directly challenges the Third Circuit Court of Appeals's previous 2-1 ruling, which found that the CFTC had jurisdiction over the prediction market covering sports. The opinion notes that customs clearance involving multiple bets does not facilitate hedging or price discovery, nor does it meet the definition of 'potential financial, economic, or commercial consequences' required for swaps in the Commodity Exchange Act (CEA). The NFL, on the other hand, criticized the CFTC's' laissez-faire 'attitude from an industry perspective, pointing out that there is a serious discrepancy between states' regulation of gaming companies and the CFTC's regulation of designated contract markets (DCM). This disagreement harms the integrity of sports betting. Dodd further refuted the CFTC's claim of 'exclusive jurisdiction', stressing that the “Commodity Exchange Act” only establishes the CFTC as a federal regulator and does not explicitly take precedence over state and tribal laws, so contracts listed on the DCM are not automatically exempt from local supervision.

At the same time as the judicial game, the CFTC took specific administrative control actions on Friday, issuing an interim final rule and another new proposal aimed at clarifying the scope of regulation. The agency clearly defined that casino-style gambling is not within its definition of swap, but event contracts are still within the scope of supervision.

The more critical variable is that the CFTC wants to formally include sporting, political, cultural, and weather-related events in event contracts that are counted as swaps, thereby incorporating them into the federal regulatory system. The move sought to define the boundary between prediction markets and traditional gambling, and establish its own jurisdiction by classifying them as financial derivatives.

However, this executive order is in stark opposition to the aforementioned opinions submitted by various parties, highlighting the fundamental differences between federal regulators and local legislators in interpreting the Dodd-Frank Act. The CFTC tried to include predictive market products that were originally in a grey area into its regulatory vision by refining the definition of 'swap', but whether this constituted an excessive expansion of state power is still a central point of contention in this case.

As the legal process progresses, Kalshi has applied for and was granted an extension to submit a response to the Supreme Court. The new deadline is November 9, 2026. This delay in time has provided more time for all parties to prepare, and also indicates the intensity of subsequent legal debates. No relevant hearings have been scheduled at the congressional level this week, which means the current focus is entirely on the Supreme Court's acceptance decision and implementation details of the new CFTC regulations. Following the dispute ruling by the Third Circuit Court of Appeals, the dispute over the right to predict market supervision has once again escalated to the highest judicial authority. The final outcome will not only determine the fate of platforms such as Kalshi, but will also provide a key case law for the entire Web3 prediction market and even the compliance path of traditional sports betting.