Prediction Markets Face a Supreme Court Showdown

Preface

Sports-related prediction markets have become the focus of a widening legal dispute over who should regulate contracts tied to real-world events. Last week, former public officials, the National Football League (NFL), 39 states, the District of Columbia, 145 tribal nations, and other parties urged the Supreme Court of the United States (SCOTUS) to review a case addressing whether such contracts qualify as swaps under federal law. Many argue that sports prediction products are forms of gambling and belong under state and tribal oversight, rather than the authority of the Commodity Futures Trading Commission (CFTC).

The dispute has gained urgency because federal appellate courts have reached conflicting conclusions. Meanwhile, the CFTC has issued two proposals setting out its view of event contracts, with one proposal already in effect. The core question is whether these products are financial instruments or wagers—and which level of government has the power to regulate them.

Lazy bag

The Supreme Court is being asked to weigh in on a dispute over whether sports prediction market contracts are federally regulated swaps or state-regulated gambling products. Amicus briefs from former Senator Chris Dodd, former CFTC Chair Gary Gensler, the NFL, 39 states, the District of Columbia, and 145 tribal nations largely support state and tribal authority. Their arguments challenge the view that the CFTC has exclusive jurisdiction over these products. The legal landscape is unsettled: two appellate courts have treated sports prediction markets as gambling subject to state regulation, while one has found them within the CFTC’s jurisdiction. The CFTC’s proposals would include sports and other event-based contracts within its interpretation of swaps. Kalshi’s response to the Supreme Court is due Nov. 9, 2026.

Main Body

The dispute reaching the Supreme Court

The latest filings place prediction markets at the intersection of financial regulation, state gambling law, and the growing business of trading contracts linked to events. The case concerns whether sports-based prediction market contracts should be treated as swaps under the Commodity Exchange Act (CEA), bringing them under federal oversight by the CFTC, or as gambling products that states and tribal governments can regulate.

Last week, a broad range of parties filed amicus briefs urging the Supreme Court to consider the dispute. The filers included former Senator Chris Dodd, former CFTC and Securities and Exchange Commission Chair Gary Gensler, the NFL, 39 states, the District of Columbia, 145 tribal nations, and other interested parties. Most of the briefs argued that sports-related prediction markets should not be classified as swaps and should not be regulated by the CFTC.

An amicus brief does not make a party one of the principal litigants. Instead, it offers a court additional legal or practical arguments that may inform its decision. The range of organizations filing briefs reflects the consequences that a decision could have for sports, gambling regulation, tribal sovereignty, and the division of authority between federal and state governments.

A split among appellate courts

The Supreme Court’s potential involvement matters in part because the lower courts are divided. Two appellate courts have ruled that prediction markets involving sports are gambling products that should be regulated by states. A different appellate court has concluded that the issue falls within the CFTC’s jurisdiction. This disagreement creates uncertainty for market operators, regulators, and parties seeking to enforce gambling laws.

The competing rulings turn on how the contracts are characterized. If a contract is a financial instrument that qualifies as a swap, federal commodities law may apply. If it is instead a wager on a sports outcome, state and tribal gambling laws may be relevant. The distinction can affect which agency or government has authority to set rules, investigate conduct, and determine whether a product may be offered.

Dodd’s argument about the law

Chris Dodd’s brief focuses on the intent and reach of the Dodd–Frank Wall Street Reform and Consumer Protection Act, the 2010 law whose name is closely associated with him. Dodd argued that the law was not designed to give the CFTC the power to displace state governments’ authority to regulate gambling. His position is that federal commodities oversight should not automatically override rules that apply to betting within a state or tribal jurisdiction.

The brief disagreed with a Third Circuit Court of Appeals panel, which ruled 2-1 that the CFTC had jurisdiction over swaps and prediction markets covering sports. Dodd’s filing draws a distinction between derivatives used as financial instruments and sports wagers. In its view, some sports contracts do not serve the economic functions generally associated with derivatives, such as hedging risk or helping discover prices.

As an example, the brief discussed parlays that combine multiple wagers, potentially involving point spreads or player performances across different games, cities, and sports. It argued that these products “do not facilitate hedging or price discovery.” The filing also contended that such wagers are not sufficiently connected to the “potential financial, economic, or commercial consequences” required for a contract to qualify as a swap under the CEA. These arguments challenge the idea that a product’s availability on a prediction market platform is enough to make it a federally regulated financial instrument.

Dodd’s brief also disputed the CFTC’s assertion of “exclusive jurisdiction.” It argued that the CEA’s grant of exclusive jurisdiction does not expressly exempt every contract listed on a designated contract market (DCM) from applicable state and tribal laws. Rather, the brief said, the provision identifies the CFTC as the federal regulator for covered financial instruments. This interpretation would leave room for state and tribal laws to apply when a contract is, in substance, a gambling product rather than a covered derivative.

Gensler and the NFL weigh in

Gary Gensler made a related argument. As a former CFTC chair who played a key role in drafting regulations implementing Dodd-Frank, he argued that the statute did not give the CFTC authority to preempt state gambling laws. He has advanced a similar position in an appellate case, making his Supreme Court brief part of a broader effort to define the limits of federal regulatory power.

The NFL emphasized its own interest in the outcome because sports betting has significant implications for the league and the wider sports sector. Its brief criticized what it described as the CFTC’s “laissez-faire” approach to the issue. The league also pointed to the contrast between how states regulate gambling companies and how the CFTC regulates DCMs, the type of licensed venue used by prediction market providers.

These arguments raise practical questions beyond the legal label attached to a contract. Different regulatory systems can impose different requirements and responsibilities on operators. A ruling that places sports prediction markets primarily under federal commodities law could limit the role of state gambling authorities. A ruling favoring state and tribal oversight could preserve or strengthen their ability to regulate products offered to residents within their jurisdictions.

The CFTC outlines its position

On Friday, the CFTC issued two proposals: an interim final rule and a separate proposal. One of the proposals is now in effect. Together, they set out the agency’s interpretation of how these products fit within the definition of a swap.

The CFTC said casino-style gambling falls outside its definition of a swap, while event contracts remain within it. The agency also wants to formally include contracts based on sports, politics, cultural events, and weather within the category of event contracts counted as swaps. This approach reflects the agency’s position that at least some contracts connected to event outcomes are subject to its authority, even when they resemble wagering to other parties.

The proposals do not, by themselves, resolve the disagreement among courts or settle the broader question of how federal law interacts with state and tribal gambling laws. Instead, they clarify the regulator’s interpretation and add another important element to a dispute that may ultimately require a Supreme Court decision. The proposals also highlight the gap between the CFTC’s view of event contracts and the arguments made by states, tribal nations, and other brief filers.

What comes next

Kalshi requested and received an extension to file a response to the Supreme Court. Its deadline is now Nov. 9, 2026. The response will be part of the process through which the Court considers whether to take up the case. The filing of amicus briefs does not guarantee that the Supreme Court will hear the dispute, but the number and range of participants demonstrate the issue’s significance.

No Congressional hearings were being tracked for the week covered by the report. The immediate developments instead center on the court filings, the CFTC’s proposed framework, and the response deadline. The eventual legal outcome could clarify whether sports-based prediction contracts are primarily financial products under federal law, gambling products subject to state and tribal rules, or a category that requires a more nuanced division of authority.

For now, the conflict remains unresolved. The briefs from Dodd, Gensler, the NFL, states, and tribal nations argue that federal commodities regulation should not automatically displace gambling oversight. The CFTC’s proposals take a broader view of event contracts. With appellate courts split, a Supreme Court review could provide a nationwide answer—or leave the regulatory question to continue developing through separate cases and agency actions.

Key Insights Table