The battle for control of the prediction markets space is heading to the Supreme Court, say US lawyers, with some claiming the Commodity Futures Trading Commission (CFTC) may have a key advantage over the states.
The struggle continues to take twists, with states claiming that platforms like Kalshi and Polymarket are offering unlicensed sports betting, and the CFTC insisting events contracts are not wagers but swaps.
“It is likely that the issue will ultimately be decided by the Supreme Court,” Linda Goldstein, partner at CM Law, told CasinoBeats. “The lower courts remain split, with some rulings favoring the markets and others siding with the states.”
The division is likely to continue in the near term, said Goldstein, who previously worked on draft fantasy sports legislation for the NBA.
The likelihood of a definitive Supreme Court intervention increases by the day. With several states attempting to sue or ban Kalshi and Polymarket (and the CFTC hitting back), some lawyers say only the highest court in the US can put an end to the legal saga.
Prediction Markets Supreme Court Battle: CFTC ‘Has Support’
If the Supreme Court comes down on one side of the dispute, the regulator may emerge victorious, say some.
“It’s difficult to predict, but I would give the CFTC the edge,” William Walsh, a partner at Benesch Law, told CasinoBeats.
In its lawsuits, the CFTC has argued that the Commodity Exchange Act preempts state gambling laws with respect to event contracts. And this argument appears to have convinced some judges to side with the commission.
Walsh said the CFTC’s position has “gained meaningful support” after the Third Circuit affirmed a preliminary injunction against New Jersey’s bid to use its gambling laws to police Kalshi’s sports-related event contracts.
“The CFTC’s active litigation approach, filing affirmative lawsuits against multiple states, demonstrates how high of a priority this is for the administration,” Walsh added, “And the courts seem to be sympathetic to the CFTC’s position.”
But insiders say states will not back down from their assertion that sports event contracts violate their betting rules.
“The question isn’t whether [prediction markets] are gambling. It’s who gets to regulate it,” Adam Bjorn, the CEO of the iGaming firm Plannatech and the operator of the Prime Sportsbook and Betcris platforms, told CasinoBeats. “And on that question, the CFTC is winning. When this gets to the Supreme Court (and it will), I think the federal preemption argument holds.”
“Sports is the disruption point,” said Bjorn. “Sports is where the state gaming regulators have a legitimate argument, because sports betting is something they’ve been licensing, taxing, and regulating for years. That’s the battleground.”
Lawmakers Prepare ‘Wildcard’
States have found powerful allies in their efforts to classify sports-related contracts as gambling.
A group of 17 Senators has launched a bid to cut off the CFTC’s access to federal funding for its lawsuits. And more lawmakers could seek to enter the fray, experts say.
In March, meanwhile, Senators Adam Schiff and John Curtis launched a bipartisan bill aimed at blocking CFTC-registered platforms “listing prediction contracts that resemble a sports bet or casino-style game.”
“It’s possible that Congress will intervene and ‘fix’ the statute to provide clarity,” Peter Sanchez Guarda, the former Acting Associate Director and Special Counsel at the Commodity Futures Trading Commission, told CasinoBeats. “But the more likely outcome is a Supreme Court showdown.”
“Congress is the wildcard,” Josh Hamlet, the founder of Clarity Tax Counsel, told CasinoBeats.
The Curtis-Schiff bill seeks to amend the Commodity Exchange Act to reclassify sports event contracts as a form of gambling.
“That means even a Supreme Court win [for the CFTC] could be undone legislatively,” Hamlet added.
Significant Overhaul of Predictions Market Incoming
For now, the legal fires continue to blaze brightly, with neither side willing to back down. But when the flames quell, and the smoke settles, what will become of a sector that analysts think will grow to the $1 trillion mark by 2030?
“You’re going to see a significant overhaul of the industry,” said Alex Boris, a Senior Trial Attorney at J&Y Law and formerly of the casino lobbying group the American Gaming Association.
Bris concluded: “[That is] not because prediction markets are going away, but because regulators are finally catching up to technology that moved faster than the rules surrounding it.”
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