The Commodity Futures Trading Commission (CFTC) is pressing a federal appeals court to reaffirm that prediction markets fall under federal supervision instead of state gambling enforcement.
In a brief filed Tuesday (May 12) with the U.S. Court of Appeals for the Sixth Circuit, the agency asked judges to overturn an Ohio ruling tied to Kalshi’s ongoing dispute with state regulators. The filing argues that Congress already gave the CFTC sole authority over futures, swaps, and similar financial products traded on federally regulated exchanges.
The case has become one of the highest-profile clashes between state gambling laws and the prediction markets industry. Ohio officials previously moved against Kalshi’s sports-related event contracts, arguing the products violate state gambling restrictions. Kalshi responded by challenging the state’s authority in federal court.
“The federal district court in Ohio took an improperly narrow view of the Commission’s jurisdiction, and we are asking the Court of Appeals to correct that error,” said CFTC Chairman Michael S. Selig in a press release. “As I’ve said repeatedly, the CFTC will not allow overzealous state governments to undermine the agency’s longstanding authority over these markets.”
CFTC clashes against state regulators over Kalshi and other prediction markets
The commission told the appeals court that Congress established the agency in 1974 specifically to avoid fragmented state oversight of commodities trading. According to the document, lawmakers concluded that inconsistent state laws had weakened national markets and created confusion for exchanges and traders.
The CFTC argued that event contracts have operated under federal oversight for decades. The filing noted that exchanges regulated by the commission have listed contracts tied to “regional insured property losses, the count of bankruptcies, temperature volatilities, corporate mergers, and corporate credit events.”
According to the filing, “States cannot invade the CFTC’s exclusive jurisdiction by re-characterizing swaps trading on DCMs as illegal gambling.”
In Arizona, regulators also attempted to pursue gambling-related enforcement against Kalshi before a federal judge temporarily blocked that effort earlier this month. The court signaled that federally regulated prediction markets may fall outside direct state gambling control while broader legal questions continue moving through the courts.
The CFTC and the Department of Justice have additionally backed other legal challenges involving state attempts to restrict sports-based prediction contracts. The recent brief warned that state-by-state oversight could subject exchanges to “varying and potentially contradictory legal standards.”
The agency warned that if states succeed in blocking sports event contracts, regulators could eventually challenge other event-based derivatives already traded under federal oversight. The commission also stressed that federal law already gives it authority to decide whether specific contracts violate the public interest, including products connected to gaming concerns.
Featured image: CFTC / Canva
