CFTC Says Prediction Markets May Have to Limit Access in Some States

The Commodity Futures Trading Commission (CFTC) has issued its first comment on sports prediction markets in a staff advisory note. The organization says platforms may have to limit their availability as states challenge the legality of the event contracts.

Dan Bernstein posted the note on X, which warns licensed companies of state regulatory actions. It states that operators should be aware of potential litigation and enforcement actions and should manage this with “appropriate contingency planning.”

The note goes on to state that companies should inform users to ensure they “understand the possible effects should State regulatory actions or ongoing litigation, including enforcement actions, result in termination of sports-related event contract positions.”

The suggestion here is that if states prohibit sports event contracts, then the CFTC will not challenge this ruling. It remains ambiguous enough that it does not explicitly state whether the CFTC approves the markets.

Will CFTC Determine if Sports Markets Violate CEA?

The organization notes that it has yet to determine its stance on sports event contracts. It states, “The Commission has not, to date, made a determination regarding whether [sports] contracts involve an activity enumerated or prohibited under CEA section 5c(c)(5)(C)(i), 7 U.S.C. § 7a-2(c)(5)(C)(i), or Commission regulation.”

The Commodity Exchange Act (CEA) section mentioned states that the CFTC may block markets related to gaming, war, assassination, terrorism, or other activities not in the public interest.

This week, Senators also drafted a letter questioning the CFTC’s stance regarding this section of the CEA. One of the questions posed included, “Why hasn’t the CFTC enforced its own Regulation 40.11, which bans gaming-related event contracts?”

Regulation 40.11 is based on the CEA and grants the CFTC the authority to prevent licensed members from offering contracts that violate its rules.

Kalshi Court Victory Sets Stage for Sports Market Expansion

Previously, the CFTC challenged Kalshi over its election markets, arguing that the market was not in the public interest and thus violated the CEA.

As a result, Kalshi was forced to remove its market predicting the next president. However, the U.S. Court of Appeals for the District of Columbia Circuit ruled in favor of Kalshi, allowing the market to be reinstated.

Kalshi has used that victory to expand into sports this year, and the CFTC, under the Trump administration, ended its case against the operator.

While the note does not say that the CFTC will challenge Kalshi or other operators offering sports markets, it also suggests it will not explicitly support the companies either.

The lack of a clear stance is likely to anger states, tribal groups, and Senators who view sports prediction markets as a form of sports betting. The letter from Senators requests that the CFTC respond to their questions by October 23, and they will expect fuller answers than the note provided.