The U.S. Commodity Futures Trading Commission is mounting a broad push to establish federal oversight of sports prediction markets, with Chairman Michael Selig confirming the agency is in talks with every major professional sports league while simultaneously backing prediction market platform Kalshi in a legal dispute with Ohio over who has the right to regulate these fast-growing financial instruments.
The CFTC is stepping up its campaign to define sports-linked prediction markets as federally regulated derivatives rather than state-governed gambling products, engaging on two fronts simultaneously: direct outreach to major professional sports leagues and legal intervention in an Ohio jurisdictional case involving Kalshi, one of the leading prediction market platforms.
Chairman Michael Selig confirmed the agency has held talks with representatives from every major U.S. professional sports league as part of its effort to police prediction markets tied to sporting events. Selig has argued that sports contracts on prediction markets constitute derivatives — financial instruments subject to CFTC jurisdiction — rather than wagers regulated by state gaming authorities.
The agency has already taken several states to court on this basis, and its intervention in Ohio marks the latest front in what is becoming a multi-state legal battle over regulatory turf. In the Ohio case, the CFTC has filed in support of Kalshi, which has faced challenges from state regulators who argue that sports-outcome contracts fall within their authority to govern gambling.
The core legal question — whether prediction market contracts on sporting events are derivatives or bets — carries significant consequences for a rapidly expanding industry. Platforms such as Kalshi have argued that their markets serve a legitimate financial function, allowing participants to hedge risks or express views on real-world outcomes. State gaming authorities, by contrast, contend that sports contracts are functionally indistinguishable from traditional sports betting, which is regulated at the state level following the Supreme Court's 2018 Murphy v. NCAA decision.
The CFTC's posture represents a notable assertion of federal pre-eminence in an area where states have wielded authority since the legalisation of sports betting. By engaging directly with professional sports leagues — whose cooperation may be relevant to data access, integrity monitoring, and enforcement — the agency appears to be laying the groundwork for a more formalised federal framework.
Neither the sports leagues nor Kalshi have made detailed public statements on the ongoing talks or the Ohio proceedings, and the outcome of the court cases is expected to significantly shape how prediction markets operate across the country.
Analysis
Why This Matters
- The outcome of these legal battles will determine whether prediction markets are treated as federally regulated financial products or state-regulated gambling, affecting where and how millions of Americans can participate.
- A CFTC victory could open the door to a nationally uniform prediction market regime, potentially accelerating growth of platforms like Kalshi while sidelining state gaming regulators.
- Professional sports leagues have commercial and integrity interests in how these markets are structured, making their role in any federal framework consequential for the broader sports industry.
Background
Prediction markets — platforms where users trade contracts tied to real-world outcomes — have existed for decades in limited academic or offshore forms, but recent years have seen a surge of interest from regulated U.S. platforms. Kalshi received CFTC approval to operate event contracts in 2020, making it one of the first regulated prediction market platforms in the country.
The legal and regulatory tension intensified after the Supreme Court's 2018 Murphy v. NCAA ruling struck down the federal Professional and Amateur Sports Protection Act, allowing individual states to legalise sports betting. That decision created a patchwork of state regulations — and ambiguity about whether prediction market contracts tied to sports outcomes fall under the same state authority or remain a separate federal category.
The CFTC has historically regulated event contracts as derivatives under the Commodity Exchange Act, but its authority over sports-linked contracts has been contested. The agency's move to take states to court and intervene in cases like Ohio's suggests it is seeking judicial affirmation of its jurisdiction before Congress or a new administration can alter the regulatory landscape.
Key Perspectives
CFTC / Federal Regulators: The agency maintains that sports prediction contracts are derivatives, not bets, and therefore fall squarely within its mandate. Chairman Selig's outreach to sports leagues signals the CFTC is seeking to build relationships and potentially co-regulatory arrangements to bolster its case.
Prediction Market Platforms (e.g., Kalshi): These companies argue they provide legitimate financial instruments that should be governed by federal commodities law, which they view as more conducive to innovation and national scale than a fragmented state-by-state gambling framework.
State Gaming Regulators / Critics: State authorities and some consumer advocates argue that sports-outcome contracts are gambling by another name and should be subject to the consumer protections, licensing requirements, and integrity safeguards built into state gaming regimes. They warn that CFTC oversight may leave gaps in player and consumer protection.
What to Watch
- The Ohio court's ruling in the Kalshi case, which could set a precedent for how other states respond to CFTC jurisdictional claims.
- Whether any major professional sports league publicly aligns with or opposes the CFTC's framework, which could shape lobbying dynamics in Congress.
- Congressional action on event contract legislation, which could either codify or curtail the CFTC's authority and resolve the state-federal conflict legislatively rather than through litigation.