Why Did the CFTC File a Brief in the Crypto.com Case?
The U.S. Commodity Futures Trading Commission has filed an amicus, or “friend of the court,” brief with the U.S. Court of Appeals for the Ninth Circuit in a case involving Crypto.com and the state of Nevada. The filing is the latest escalation in a widening dispute between federal regulators and state authorities over who controls prediction markets.
Crypto.com’s prediction-market arm sued Nevada in June after the state sought to block it from offering sports-event contracts. A lower court judge later ruled that sports-event contracts were not within the CFTC’s jurisdiction and could therefore fall under Nevada’s gaming laws. Crypto.com appealed that decision.
In its brief, filed Tuesday evening, the CFTC argued that Congress granted it “exclusive jurisdiction” over futures and related products under the Dodd-Frank Act passed after the 2008 financial crisis. That mandate, the agency said, extends to event contracts.
“… Congress did not limit covered swaps to binary outcomes; instead, it expressly encompassed contracts measured by the extent of the occurrence of an event,” the agency wrote. “This broad language encompasses contracts based on the margin of victory or any other quantifiable result of a sports event.”
Investor Takeaway
How Is the CFTC Framing Event Contracts?
CFTC Chair Michael Selig has argued that states are overreaching by attempting to regulate prediction platforms under gaming statutes. In a statement Tuesday, he described state litigation efforts as a “power grab.”
“Event contracts allow businesses and individuals to hedge event-driven risks, enable investors to manage portfolio exposure, and provide the public with information about the outcome of future events,” Selig said. “These products are commodity derivatives and squarely within the CFTC’s regulatory remit.”
“As I’ve said before, the CFTC has the expertise and responsibility to defend its exclusive jurisdiction over commodity derivatives, and that’s exactly what we’ll do,” he added.
In a separate Wall Street Journal op-ed earlier this week, Selig wrote that the agency would “no longer sit idly by while overzealous state governments undermine the agency’s exclusive jurisdiction over these markets.” He reiterated that event contracts qualify as swaps under federal law.
Speaking to Fox News on Tuesday, Selig called the issue “clear cut,” adding that event contracts differ from casino wagers. “They’re actual derivative contracts,” he said. “They go through a clearinghouse, they’re settled through offset, you can get in and out of your position, and they have certain investor protections that are really important.”
What Changed at the CFTC?
The agency’s current stance contrasts with prior efforts under former Chair Rostin Behnam. In 2024, the commission proposed rules that would have restricted event contracts tied to gaming, war, terrorism, and assassination, citing concerns that such products could be “contrary to the public interest.”
That rulemaking was scrapped earlier this month. Since then, the debate over prediction markets has intensified as platforms such as Kalshi and Polymarket have grown rapidly, particularly following the 2024 U.S. election cycle.
Operators argue that Congress granted the CFTC sole authority over these derivatives under the Commodity Exchange Act. States, meanwhile, contend that when contracts resemble sports bets, they fall under local gaming and gambling laws.
Investor Takeaway
How Is Congress Responding?
Lawmakers on Capitol Hill are split. In January, Rep. Ritchie Torres introduced legislation aimed at setting limits on how elected officials engage with prediction markets after bets surfaced related to the potential capture of Venezuelan President Nicolás Maduro.
On Friday, Sens. Catherine Cortez Masto and Adam Schiff led 21 Democratic senators in urging Selig not to intervene in ongoing court cases and to ensure that any future CFTC rules “adhere to the statute and prior regulations.”
“The real-world consequences are already evident,” the lawmakers wrote. “Prediction market platforms are offering contracts that mirror sportsbook wagers and, in some cases, contracts tied to war and armed conflict. These products evade state and tribal consumer protections, generate no public revenue, and undermine sovereign regulatory regimes.”
Republican Sen. Bill Hagerty took the opposite view, writing that “clear and consistent rules of the road will give markets and federal regulators the certainty they need to unleash the next wave of innovation in America.”
At the state level, Utah Gov. Spencer Cox argued that prediction markets amount to gambling. “They are destroying the lives of families and countless Americans, especially young men,” Cox wrote. “They have no place in Utah.” He added: “Let me be clear, I will use every resource within my disposal as governor of the sovereign state of Utah, and under the Constitution of the United States to beat you in court.”
The Ninth Circuit’s eventual ruling could set a precedent that determines whether prediction markets operate primarily under federal derivatives law or remain vulnerable to state-by-state gaming enforcement. Until then, the legal boundaries for event contracts remain contested.
