CFTC Files Court Brief Claiming Exclusive Power Over Prediction Markets

The fight over who gets to regulate prediction markets in the United States moved into a federal appeals court this week, and the Commodity Futures Trading Commission has picked a side. On Tuesday, February 17, the agency filed a friend of the court brief with the U.S. Court of Appeals for the Ninth Circuit arguing that event contracts listed on federally registered exchanges fall under its exclusive jurisdiction, and that state gaming regulators have no authority to shut them down.

The filing came in North American Derivatives Exchange v. Nevada, the case brought by the prediction market arm of Crypto.com against the Nevada Gaming Control Board. A district judge had ruled that sports event contracts sit outside the CFTC’s remit and can be policed under Nevada’s gambling laws. Crypto.com appealed, and the regulator has now asked the appeals court to reverse course.

What the CFTC is arguing

In its official press release, the CFTC said courts and Congress have long recognized its role over these markets, and that states lack the authority to regulate products that fall within its exclusive jurisdiction. The agency warned that letting states step in would have destabilizing economic effects.

The brief makes three main points, according to a summary by Charltons Quantum. First, it says event contracts qualify as swaps under the Commodity Exchange Act. Second, it argues that federal law occupies the field, so state gambling statutes cannot apply to contracts listed on designated contract markets. Third, it says that even without field preemption, state rules that conflict with federal oversight must give way.

The CFTC also pointed to history. It first recognized event contracts in 1992, when it approved the Iowa Electronic Markets, a university-run venue for trading on election outcomes. After the 2008 financial crisis, Congress expanded the agency’s authority over contracts based on commodities, a term the statute defines broadly.

Chairman Michael Selig framed the filing as a response to legal pressure on the industry. In the release, he said CFTC-registered exchanges have faced “an onslaught of lawsuits seeking to limit Americans’ access to event contracts,” and that the products “are commodity derivatives and squarely within the CFTC’s regulatory remit.” Selig also argued that event contracts help businesses and individuals hedge risks tied to real-world events and give the public useful information about likely outcomes.

A sharp change in tone at the agency

The brief follows an opinion piece Selig published in The Wall Street Journal on Monday, in which he wrote that the agency would no longer sit idly by while state governments undermine its jurisdiction. According to The Block, Selig has described state lawsuits against prediction market operators as a power grab.

That stance is a clear break from the agency’s posture under former Chairman Rostin Behnam. In 2024 the CFTC proposed rules that would have restricted event contracts tied to gaming, war, terrorism and assassination, citing concerns that they could be contrary to the public interest. Selig’s CFTC withdrew that proposal earlier this month.

The brief is also unusual for the agency. Charltons Quantum reported that the CFTC has filed only a handful of amicus briefs since 2000, which makes this the regulator’s first formal intervention in the wave of litigation over event contracts.

The states are pushing back

Prediction markets such as Kalshi and Polymarket have grown quickly since the 2024 U.S. election, and sports contracts have become one of their most popular offerings. That growth has drawn the attention of state gaming regulators, who say the platforms are offering unlicensed sports betting that bypasses state consumer protections and generates no tax revenue for states. Selig has said there are close to 50 active legal cases involving prediction markets.

Nevada regulators sent cease and desist letters to operators in 2025, and Crypto.com suspended its Nevada operations after losing its bid for a preliminary injunction. Other states have pursued similar actions. Utah Governor Spencer Cox has said prediction markets amount to gambling and has vowed to fight the CFTC’s position in court.

The disagreement also runs through Congress. On February 13, Senators Catherine Cortez Masto of Nevada and Adam Schiff of California led a group of 21 Democratic senators urging Selig not to intervene in pending cases. Republican Senator Bill Hagerty welcomed the agency’s involvement, saying clear rules would give markets certainty.

Why it matters for crypto

Prediction markets have become one of the most visible consumer products to come out of the crypto industry. Polymarket settles trades in stablecoins on a public blockchain, and Crypto.com, one of the largest exchanges, runs its own event contract business. Kalshi, while not a crypto platform, competes for many of the same users.

How the Ninth Circuit rules will help decide whether these products can operate under a single federal rulebook or must navigate a patchwork of state gaming laws. A ruling in the CFTC’s favor would strengthen the argument that a federally registered exchange can offer event contracts nationwide. A ruling for Nevada would give states more room to restrict sports contracts, and possibly other categories, within their borders.

Other appeals courts are expected to weigh in on similar questions, which raises the prospect of conflicting decisions that could eventually reach the Supreme Court. For now, the filing signals that the federal regulator intends to defend the industry’s legal position rather than watch from the sidelines, a shift that crypto-linked prediction platforms have sought for years.

The Ninth Circuit has not yet ruled on the appeal.