Senators Press CFTC on Sports Event Contracts as Legal Pressure Mounts

A draft letter is currently circulating on Capitol Hill in which a bipartisan group of senators is questioning why the Commodity Futures Trading Commission (CFTC) has allowed sports event contracts to proliferate in ways critics say blur the line between financial derivatives and gambling.

Senators Catherine Cortez Masto (D-NV) and John Curtis (R-UT) are leading the inquiry, as first reported by InGame. The draft letter includes 11 questions to the CFTC, demanding answers by October 23.

“The CFTC must not override state and tribal law allowing sports betting in all 50 states by permitting some companies to categorize their sports betting activities as ‘event contracts,'” the senators wrote, warning that the federal stance risks undermining state and tribal sovereignty.

Senators’ 11 Questions to the CFTC

The lawmakers’ questions directly address whether sports event contracts should be treated as regulated financial products or considered illegal gambling instruments. The issues raised include:

1. Why hasn’t the CFTC enforced its own Regulation 40.11, which bans gaming-related event contracts?
2. When will the CFTC resume applying the rule to prevent illegal sports event contracts?
3. How many designated contract markets have certified sports event contracts, and how is the CFTC guiding them?
4. If the CFTC believes these contracts are legal under the Commodity Exchange Act, how is it advising firms to respect state laws that prohibit sports betting?
5. How is the CFTC advising contract market companies to comply with state and tribal laws requiring age limits and access controls?
6. How is the CFTC guiding these firms on responsible gambling requirements, such as time limits, budgets, trained staff, and addiction resources?
7. How will the CFTC ensure firms don’t use “contract markets” as a cover for illegal gambling?
8. What safeguards has CFTC put in place to prevent manipulation by athletes, referees, or team staff? How often does the agency follow up to check for such abuses?
9. How is the CFTC ensuring compliance with federal laws like the Wire Act, as well as anti-money laundering and geolocation standards?
10. How is the CFTC advising sports contract market firms to comply with tribal sovereignty in areas where tribes have exclusive agreements?
11. Does the CFTC see sports betting as entertainment or investment products for financial gain?

Senators Target Rule 40.11 & Self-Certification

At the center of the letter is Regulation 40.11. The provision prohibits event contracts “involving gaming” and other activities that are contrary to the public interest. Critics argue that the CFTC has failed to enforce the rule consistently.

Prediction platforms like Kalshi offer sports event contracts, which now account for the majority of trading volume. Kalshi enables users to trade on the outcomes of professional and collegiate sporting events, including the NFL and NCAA football.

The CFTC has allowed Kalshi to offer these contracts under a self-certification process. With it, a prediction market platform certifies specific contracts, such as player props, without the approval of the CFTC. The agency can then review them and require the platform to remove these contracts. However, that could take months.

That has raised concerns among lawmakers that companies are sidestepping state gambling laws and consumer protection rules.

Daniel Wallach, a gaming law attorney writing for Forbes, argued that the CFTC’s inaction “could still upend Kalshi’s sports betting lawsuits,” because the regulation appears to ban exactly this type of contract.

States & Tribes Push Back

Regulators in Nevada, Maryland, and New Jersey have already issued cease-and-desist orders against Kalshi’s sports event contracts. The platform has countersued, and litigation is ongoing. Massachusetts has taken a step further. The state’s Attorney General filed a lawsuit in state court against Kalshi in an effort to assert local authority over such markets.

Tribal governments are also sounding alarms. The Tribal Alliance of Sovereign Indian Nations has warned that federally sanctioned contracts could preempt hard-won tribal gaming exclusivity, a significant source of economic stability for many communities.

Some tribes have also filed lawsuits against Kalshi. They argue that the platform offering event contracts on tribal lands violates the Indian Gaming Regulatory Act (IGRA). It also threatens tribal sovereignty.

Meanwhile, lobbying for Kalshi has intensified. Former Senator Blanche Lincoln, now a lobbyist for Kalshi, has submitted supportive comments to the CFTC. Notably, that marks a reversal from her past congressional positions.

Additionally, Brian Quintenz, President Trump’s nominee to chair the CFTC, is facing scrutiny over his advisory role at Kalshi, which he plans to resign from if confirmed.

Integrity & Consumer Protection Concerns

Lawmakers are worried about consumer safeguards and game integrity.

Unlike state-licensed sportsbooks, event-contract platforms could lack measures such as age verification, anti-money laundering protocols, and responsible gambling tools.

Sports leagues have also weighed in. Major League Baseball urged the CFTC to ensure integrity protections, warning that athletes, referees, or insiders could potentially manipulate markets.

The league is already investigating potential sports betting violations involving Cleveland Guardians pitchers Emmanuel Clase and Luis Ortiz. However, these cases are not related to event contract markets.

The senators’ letter echoes these concerns, inquiring about the steps the CFTC is taking to prevent insider abuse or conflicts of interest.

What Happens Next

The CFTC and SEC convened a joint roundtable on September 29. In it, they aimed to explore regulatory harmonization, with event contracts listed as one of several priority topics.

Notably, the CEOs of Kalshi and Polymarket were present at the roundtable. Still, reports indicate that the event did not address the senators’ concerns about sports event contracts or the enforcement of Regulation 40.11.

For now, the roundtable reinforced the signal that the SEC and CFTC view coordination as vital in the era of converging innovations. Still, the session left many questions unanswered about when (or whether) sports-based event contracts will be addressed in depth.

The senators’ demand for answers by late October ensures the agency cannot avoid the issue much longer.