The fight over sports prediction markets just got a whole lot bigger.
The Commodity Futures Trading Commission received a communication from top legal officers of 44 states, arguing these contracts fall outside the agency's regulatory scope. They argue those contracts look a lot like sports betting, which states have always controlled. Ohio Attorney General Andy Wilson led the coalition, which included every state except five: Texas, Florida, Georgia, Missouri, and New Hampshire.
The states' letter calls the CFTC's proposed rule an overreach that "goes beyond the CFTC's statutory powers" and conflicts with the Constitution. They want the agency to scrap its current approach entirely and recognize that sports bets belong under state law.
Monday night marked the close of the CFTC's public comment period for its initial proposed rule on prediction market regulation, and the letter was submitted at that time. The measure primarily focuses on exchanges' sports offerings.
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Platform trading volumes surged thanks to the 2026 FIFA World Cup. Both the CFTC and prediction market platforms contend that every event contract qualifies as a swap, a type of derivative under the commission's oversight. But many states argue that these sports-related agreements closely resemble sports betting, an area they regulate.
The CFTC published an initial draft of its proposed rule for prediction markets back in June. That draft concentrated on the contentious sports event contracts, detailing which might eventually be banned. The rule also defined "gaming" as an activity pursued for recreation or entertainment, subject to rules, and relying on measurable results from skilled actions during the event.
The CFTC is not backing down quietly. It is currently suing nine states over its claimed authority to police these markets.
Derivatives marketplace CME Group sent a letter disagreeing with the CFTC's definition. "By defining 'gaming' as the sport itself rather than the financial wagering on the sport, the CFTC's definition suggests the [Commodity Exchange Act] is preempting state sports regulations, which is a striking overreach," wrote CME general counsel Jonathan Marcus.
Rothera, a prediction market platform that started in June 2026, advocated for the CFTC to use the "gaming" definition because it focuses on the activity rather than the wager. "A definition keyed to wagering, or to 'risking something of value' would, as the Commission recognizes, sweep in every event contract," wrote Rothera CEO Thomas Chippas. "Rothera agrees that a definition keyed to 'wagering' should be rejected."
The courts are split too. In late June, a Michigan judge prohibited Kalshi from providing sports bets within the state. But on Monday, a Minnesota federal judge issued a temporary order stopping a statewide prohibition on prediction markets from starting Saturday.
Many prediction market observers believe the Supreme Court will ultimately decide which authority governs sports-related event contracts. In the meantime, numerous other court rulings are determining the fate of prediction market products. These rulings frequently produce conflicting outcomes.
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