On April 24, the legal fight over prediction markets entered a new phase. The Commodity Futures Trading Commission sued New York in federal court to stop the state from applying its gambling laws to federally regulated prediction markets. The same day, the agency filed a brief in Massachusetts’ highest court asserting that event-contract markets fall within its exclusive jurisdiction.
The CFTC had already begun challenging state regulation more aggressively, including lawsuits against Arizona, Connecticut and Illinois earlier that month. But the April 24 actions made clear that the federal regulator was pursuing the jurisdictional dispute on multiple fronts. Four days later, it sued Wisconsin as well.
The timing was significant. Eighteen days earlier, the U.S. Court of Appeals for the Third Circuit had handed Kalshi the industry’s most important appellate victory, holding in a precedential decision that its sports-event contracts qualified as swaps and that Kalshi was likely to establish that federal law preempted New Jersey from regulating trading on its federally licensed exchange.
For investors, the fight is increasingly about regulatory structure. Prediction markets are already subject to federal oversight. The question is whether they can operate principally under one national derivatives regulator or whether CFTC regulation will coexist with state-by-state gambling restrictions that can determine which contracts may be offered and where.
The litigation docket can make that question look more settled than it is. The dataset for this project, created with the help of Mick Bransfield’s litigation tracker, frozen on Aug. 14, contains 160 docket proceedings involving 100 underlying disputes. Fifty-five involve the central conflict between federal commodities regulation and state regulatory authority. Only 11 selected federal decisions have substantively addressed the issues at the center of that fight. And only one federal circuit has issued a precedential ruling favorable to the federal or platform position on the central issue.
The next phase of the prediction-market story therefore runs largely through the appeals courts.
A Hundred Disputes Obscure One Central Investment Question
Treating all prediction-market litigation alike obscures the cases most capable of changing the industry’s economics.
The 100 underlying disputes in the database include several different kinds of litigation. Some concern whether the Commodity Exchange Act prevents states from treating sports-event contracts as illegal gambling. Others involve consumer class actions, attempts to recover gambling losses, tribal gaming law, or private disputes over data and market operations.