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A coalition of 44 state attorneys general has formally opposed the Commodity Futures Trading Commission’s proposed rule on prediction markets, arguing that the agency is stepping far beyond its legal authority.
In a joint comment letter, the states said the CFTC’s plan to regulate sports prediction markets would “drastically expand federal regulatory authority in an area of major economic and political consequence that States have traditionally regulated.”
They contend that sports betting is not a financial derivative and therefore falls outside the scope of the Commodity Exchange Act.
The letter stresses that gambling has always been a matter of state police power, while the federal government’s role has been limited to financial instruments like futures and swaps.
States argue gambling regulation belongs to them
The letter stresses that gambling regulation has always been a matter of state police power, dating back to colonial prohibitions on dice and cards and continuing through modern licensing regimes in Nevada, New Jersey, Ohio, and other states.
Attorneys general argue that the CFTC’s proposal would “take a sledgehammer to the States’ historic power,” sweeping away local frameworks for licensing, taxation, consumer protection, and responsible gaming.
They note that states have built detailed systems to safeguard integrity and protect against problem gambling, while setting rules that meet local needs.
Federal law and constitutional limits
The states also argue that the proposed rule would conflict with existing federal statutes. They note that the Wire Act of 1961 still prohibits interstate sports wagering, and that the Indian Gaming Regulatory Act gives tribes exclusive rights to regulate gaming on their lands.
Allowing the CFTC to take control, they say, would amount to an implied repeal of these laws, something courts are reluctant to accept without clear congressional intent.
The letter emphasizes that Congress created the CFTC to oversee commodity futures and swaps, not sports betting, and that “sports bets are not swaps, futures, or other derivatives.”
The coalition highlighted the scale of the sports betting industry, noting that legal sportsbooks handled nearly $150 billion in wagers in 2024. They argue that such a vast and politically sensitive market cannot be placed under federal control without an unmistakable directive from Congress.
The Supreme Court’s 2018 decision in Murphy v. NCAA is central to their case: the Court ruled that Congress can regulate sports gambling directly, but if it chooses not to, states remain free to act.
A matter for the Supreme Court?
The fight over prediction markets is steadily climbing toward the nation’s highest court. Legal experts say the Supreme Court will likely decide who has the authority to regulate sports‑related event contracts, but until then, lower courts are shaping the rules in conflicting ways.
Recent rulings show how divided the legal landscape has become. In late June, a Michigan judge stopped Kalshi from offering sports wagers in the state, siding with regulators who argued the contracts amounted to gambling.
Just weeks later, a federal judge in Minnesota took the opposite approach, issuing an order that temporarily blocked a statewide ban on prediction markets from taking effect. That injunction, delivered on Monday, gave platforms like Kalshi and Polymarket a reprieve while the broader case continues.
The conflicting decisions have only strengthened expectations that the Supreme Court will be asked to step in and settle the question of jurisdiction once and for all.
