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Louisiana has become the latest US regulator to take a hard line on sports-linked prediction markets, warning its licensed operators that “event contracts” on games and player performance will be treated as illegal gambling if they are offered outside the state’s sports betting framework.
In a letter dated 5 December, Louisiana Gaming Control Board (LGCB) chair Christopher Hebert told sportsbooks and their affiliates that products marketed as “contracts”, “swaps” or “markets” on sports outcomes still fall squarely under Louisiana’s definition of sports wagering – and cannot be offered by anyone who does not hold a state sports betting licence.
Regulator draws line between CFTC markets and state sports betting
Hebert’s letter is aimed at operators and partners exploring access to sports event contracts listed on federally regulated prediction exchanges such as Kalshi or Crypto.com’s derivatives arm.
“It is the board’s position that any product which allows individuals to stake value on the outcome of a sporting event is sports wagering under Louisiana law,” he wrote, adding that re-labelling those products as financial instruments does not change their legal status in the state.
The board emphasised that it has exclusive authority over gaming activity under Louisiana’s control laws and criminal code. In its view, contracts based on the whole or partial result of a game clearly meet state definitions of gambling, and “exchange wagering” has already been written into statute as a form of sports betting.
Crucially, the letter states that status does not change even when contracts are traded on a platform overseen by the US Commodity Futures Trading Commission (CFTC). If a company wants to offer those products in Louisiana, it must do so as a licensed sportsbook and comply with all state rules on betting, KYC, and responsible gambling – not rely solely on its CFTC permissions.
DraftKings, FanDuel, and Fanatics may be pushed to the spotlight
Louisiana’s intervention comes as several national brands combine traditional sports betting with event-contract products in other states. DraftKings, FanDuel, and Fanatics, all licensed for mobile wagering in Louisiana, have either launched or announced plans to offer sports event contracts through prediction-style products in other parts of the US.
Some regulators, including those in Illinois, have warned that operators must consider how activity in one state could impact their suitability in another, suggesting that offering sports contracts in states where they are considered illegal betting might raise licensing concerns.
Louisiana stopped short of that broader stance. Hebert’s letter focuses on what licensees and their related entities do within the state, rather than setting expectations on their national strategy. Nonetheless, the signal is clear: routing Louisiana customers to sports event contracts via prediction exchanges will be treated as unlicensed gambling.
A Nationwide tug-of-war over who regulates prediction markets
The Louisiana move occurs in the midst of a broader jurisdictional tug-of-war over predictive platforms. Under current federal practice, most event contracts – including those based on elections or macroeconomic data – are classified as derivatives by the CFTC. Kalshi and Polymarket both operate under CFTC frameworks that treat their products as financial instruments rather than bets.
Sports contracts, however, have become a flashpoint. In late November, a federal judge in Nevada ruled that Kalshi’s sports markets do not qualify as “swaps” under the Commodity Exchange Act and can therefore be regulated as gambling under state law. The decision lifted an injunction that had shielded Kalshi from Nevada enforcement, opening the door for gaming regulators there to treat its sports products as unlicensed betting.
Maryland and other states have also questioned whether prediction markets can sidestep local gambling laws simply by listing sports contracts on a CFTC-regulated venue. Illinois regulators have warned licensees to tread carefully around products that resemble betting, regardless of how they are labeled.
Against that backdrop, Hebert argued that federal rules cannot be used as a shield when state law explicitly classifies a product as illegal gaming. If an event contract relates to “gaming or other unlawful activity”, he wrote. CFTC rules themselves limit their permissibility – a point Louisiana sees as closing off any defence based on federal oversight alone.
Operators and exchanges on prediction markets
So far, Louisiana has not issued a cease-and-desist order to any prediction platform, and the Attorney General’s office has not published a separate opinion on sports contracts.
However, the LGCB has already demonstrated that it is willing to chase what it sees as illegal gambling out of the state. If sportsbooks or their affiliates were to steer Louisiana customers into sports contracts on external exchanges, they could face penalties ranging from fines to conditions on their licences.
For prediction markets, Louisiana’s move is another reminder that CFTC registration does not guarantee acceptance at the state level, especially when contracts are tied to games and athletes. The more that states assert jurisdiction over sports event contracts, the more fragmented the US map becomes for platforms trying to build a national market.
As states like Nevada, Maryland, Illinois, and now Louisiana pull sports contracts into their gambling remit, the underlying question raised by former SEC chair Jay Clayton in a recent New York event looms larger: when does an event contract function more like a financial option?
Until federal and state regulators converge on a clearer answer, prediction platforms and sportsbooks will have to navigate a patchwork of rules, with letters like Louisiana’s serving as an early warning that the risk of missteps is rising.
Source: SBC News
