The predict has hit the fan.
In case you weren’t aware, there is a growing battle over sports-related event contracts being fought by so-called “prediction markets,” state-level gambling regulators, and the legal gaming industry.
A prediction market is where you can go to buy or sell a contract tied to a certain event, such as an election.
In fact, it was in and around last year's U.S. presidential election that prediction markets rose to prominence, as trading on those platforms proved popular for people looking to make a de facto wager on the outcome.
Those wagering markets don't exist at state-regulated sportsbooks. So there was a divide between what betting opportunities prediction markets offered (politics, culture, economics) and what sportsbooks offered (sports).
That wall started to come tumbling down late last year, as prediction markets have begun offering more and more event contracts for sports. State-level sports betting watchdogs have noticed.
As of Wednesday, regulators in Nevada, New Jersey, Ohio, and Illinois are trying to shut down trading of federally regulated sports event contracts within their borders, which is or was facilitated by Kalshi, Robinhood, and Crypto.com.
The legal sports betting regulators in those states – and they seem unlikely to be the last – have all come to a similar conclusion. That conclusion is, more or less, that the trading of these contracts via prediction markets represents, as New Jersey alleges, “unauthorized sports wagers.”
Nevada, New Jersey, Ohio, and, as of Tuesday, Illinois have now all sent cease-and-desist letters to Kalshi over allegedly unauthorized sports wagering by the federally regulated prediction market:https://t.co/1RnfZua5U4
— Geoff Zochodne (@GeoffZochodne) April 2, 2025
(h/t @AlTruda73) pic.twitter.com/1blvPDx5HP
In other words, letting people buy and sell contracts tied to sporting events (such as buying a “yes” contract for a team to win a game or a championship) is akin to just betting on sports. And, in certain states, you best have a license for that, because they might have legalized sports betting, but it doesn’t mean anyone can start slinging single-game wagers.
So state-level regulators are getting active and have sent cease-and-desist letters to Kalshi, Robinhood, and Crypto.com. States won the right to offer sports betting and are protecting their turf.
But there is another, unspoken conclusion that I think these cease-and-desist-sending states have reached as well: Nobody’s coming to help us, at least not soon or as soon as we’d like.
God's away on business
As Tom Waits sorta-sings: If you're looking for someone to pull you out of that ditch, you're out of luck.
The federal regulator that prediction markets answer to is the Commodity Futures Trading Commission (CFTC). That would, in theory, be the entity telling Kalshi or Crypto.com to stop offering certain event contracts, which are available in all 50 states, not just those with legal sports betting.
But the CFTC hasn’t stopped sports event contracts, and there’s no clear indication if and/or when it ever will. So, with no sign that the federal cavalry is on the horizon, states are taking action, including by launching investigations in Connecticut and Massachusetts.
Kalshi has fired back with lawsuits in Nevada and New Jersey, and a similar filing seems possible anywhere else state regulators see a problem. The company believes federal oversight and law should override state-level objections, and says so in court documents.
"The threatened actions by the Ohio [Casino Control Commission] seek to undermine not just Kalshi’s contracts, but the authority granted by Congress to the Commodity Futures Trading Commission, which has safely and effectively governed commodities markets for decades,” Kalshi CEO and co-founder Tarek Mansour said in a statement on Tuesday.
Furthermore, Kalshi is arguing the CFTC has blessed sports event contracts by, well, doing nothing.
“These contracts are subject to extensive oversight by the CFTC, and – critically – they are lawful under federal law,” Kalshi said in its New Jersey lawsuit. “Two months ago, the CFTC allowed Kalshi’s sports-outcome contracts to take effect without review.”
The company added that “[u]nless and until the CFTC takes action on Kalshi’s sports-related contracts, they remain authorized under federal law.”
Care to comment?
OK, so what does the CFTC think about sports-related event contracts?
I’ll put my hand up here and say I’m not exactly sure. But the impression the CFTC has given to Kalshi and others, which is now being cited in court, is that sports event contracts are kosher.
That said, I think there’s a distinction between letting something “take effect without review” and saying, “Absolutely, yes, we approve that; in fact, we love sports event contracts and they should be allowed to spread across the country.”
At any rate, I'd say there’s ambiguity, and that’s contributing to our current conflict. Let’s start with how these contracts are getting “approved."
Kalshi and Crypto.com have “self-certified” their sports offerings, which means they are telling the CFTC that their products comply with applicable laws and regulations. A day later, those contracts can begin trading.
“Within 10 days, the CFTC reviews the reports and may initiate review of any contract under its purview,” Kalshi notes in its New Jersey lawsuit. “If the CFTC does not take action within the ten-day probationary period, the contract automatically becomes ‘effective.’”
For example, Crypto.com submitted paperwork for sports-related event contracts on Dec. 19 of last year, which said the product complied with the applicable law and rules.
The CFTC didn’t intervene in 10 days (Christmas holidays might have played a role), but it did say on Jan. 14 it would review the two sports-related event contracts that Crypto.com self-certified.
The regulator also asked the company to stop trading of those contracts during the 90-day review period, a request Crypto shrugged off. This was after the CFTC determined the contracts may involve an activity contrary to the public interest, such as “gaming."
CFTC TBD
Now, that review might have produced a more concrete opinion from the CFTC regarding sports event contracts. But here’s the thing: it doesn’t look like it concluded. Nor does it look like it is going to conclude.
The short version of why that may be the case is Crypto.com withdrew its first sports event contracts on Feb. 3, after substituting a newer version on Jan. 30 that has not been reviewed by the CFTC.
A person familiar with the company said the sports contracts trading on Crypto.com’s CFTC-regulated exchange now fall under the more recently self-certified products.
So, with the old contracts pulled, there’s nothing for the CFTC to review. Meanwhile, the new contract still allows for trading sports event contracts but has not been challenged by the regulator.
Kalshi said in its New Jersey lawsuit that it self-certified and began listing sports-related contracts on its exchange on Jan. 24.
“Kalshi’s sports-related contracts allow users to place positions on which teams will advance in certain rounds of the NCAA College Basketball Championship or who will win the U.S. Open Golf Championship,” the company said. “The CFTC has authority to review and prohibit contracts involving gaming if it concludes that they are ‘contrary to the public interest’ … but the CFTC declined to review Kalshi’s sports-related contracts.”
So if there’s no decision coming on these self-certified sports event contracts, where else might clarity come from? And could that be enough for states to call off the dogs?
The same day Donald Trump was inaugurated for his second term as president, the CFTC announced commissioner Caroline Pham was taking over as the regulator’s acting chair. Pham had criticized the CFTC’s approach to event contracts in the past, and on Jan. 27 announced the launch of a series of public roundtables on various happenings, including prediction markets.
On Feb. 5, the CFTC said it would eventually hold a roundtable to help “inform the Commission’s approach to regulation and oversight of prediction markets, including sports-related event contracts.”
Just a few obstacles
In making the announcement, the CFTC said it had identified “several key obstacles to balanced regulation of prediction markets,” and the list that followed was extensive.
For our purposes, let’s stick to the last string of concerns the CFTC highlighted: “other issues including but not limited to Constitutional questions such as the Commerce Clause, States’ rights and State regulatory schemes, Federalism, Federal preemption doctrines, and Tribal sovereignty as well as other federal laws applicable to sports betting.”
So, at the very least, you have a CFTC that has not ruled out sports event contracts even as it is pondering how best to provide “balanced regulation” of prediction markets amid a pile of preexisting concerns.
It’s possible the roundtable will provide more clarity. The CFTC said it will take place “approximately 45 days at the conclusion of its requests for information on certain sports-related event contracts.”
That isn’t a firm date, and the CFTC has not telegraphed what could actually result from the meeting. For what it’s worth, though, gambling industry consultant Dustin Gouker has reported the get-together is still a month away.
At any rate, the above is scratching the surface of an extensive legal and regulatory record that has been created by the debate over event contracts, including those that involve sports.
Muddling things further is a September court decision that helped pave the way for Kalshi and others to offer contracts tied to the presidential election.
The ruling included a definition of “gaming” – an activity that could prompt the CFTC to prohibit trading of an event contract – as a reference “to playing games or playing games for stakes.”
“Kalshi’s contracts do not involve unlawful activity or gaming,” Judge Jia Cobb wrote. “They involve elections, which are neither.”
And now Kalshi has been hit with a cease-and-desist letter by Ohio regulators in connection with sports event contracts. The Ohio Casino Control Commission sent C&Ds to Robinhood and Crypto dot com as well, per a press release. pic.twitter.com/VuEPPux4aR
— Geoff Zochodne (@GeoffZochodne) March 31, 2025
Oh, there’s also a discussion that happened on the floor of the U.S. Senate in 2010 (noted in Cobb’s decision) wherein a senator said a section of the Commodity Exchange Act was meant to “prevent gambling through futures markets” and restrict “‘event contract[s]’ around sporting events such as the Super Bowl, the Kentucky Derby, and Masters Golf Tournament.”
The election contract-related decision is still technically being appealed. And, as it happens, it looks like Nevada and other state gaming regulators may continue to have concerns about election-related wagering in addition to their worries about sports event contracts.
When a decision will be issued by the D.C. appeals court is anyone’s guess, but it seems unlikely it will provide any additional insight on sports event contracts, as that was not the main issue in the case.
All of the above might help to explain why state sports betting regulators feel like they can’t wait for the federal cavalry to arrive. If they believe unauthorized betting is going on in their backyard, and that no one else is doing anything about it, they’re going to try to do something about it.
As Ohio Casino Control Commission executive director Matthew Schuler said in a press release on Monday: “The Commission must take action to fulfill its statutory responsibilities and ensure the integrity of sports gaming in Ohio.”
If the CFTC won’t act, states will. And if the CFTC does act, the states still might do something.
