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CFTC

Sports Contracts Put CFTC Prediction-Market Rules to the Test

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Can a prediction market legally offer sports contracts? There is no single nationwide answer established by the latest appellate rulings. As of October 3, 2026, the Ninth Circuit and Sixth Circuit had each rejected Kalshi’s requests for preliminary relief in disputes involving state gambling laws, but their decisions covered particular contracts, states and procedural questions—not a final ruling for every sports market. The Commodity Futures Trading Commission (CFTC) had also proposed a new event-contract framework in June 2026, but had not finalized it.

Why sports prediction contracts raise a legal question

A sports event contract lets a trader take a position tied to an outcome, such as which team will win. The CFTC describes event contracts as derivatives that typically have binary payoffs: the contract pays according to whether a specified event occurs. A contract’s market label does not, by itself, decide how the law classifies it. The CFTC’s June 2026 proposal notes that “event contract” is not a term defined in the Commodity Exchange Act (CEA) or CFTC regulations; the agency has used it to describe certain derivatives since at least 2008.

The dispute turns on two related but separate questions. First, does a particular sports contract meet the CEA’s definition of a “swap” or another instrument within the CFTC’s jurisdiction? Second, if federal commodities law applies, does it displace the state gambling law being enforced? A CFTC registration, exchange listing or market label does not automatically answer both questions.

What the appellate courts decided

The rulings below concern preliminary injunctions—requests for temporary court orders while litigation continues. They are significant appellate decisions, but they are not a nationwide final merits judgment on every platform or sports contract.

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Decision State dispute What the court held Procedural result
KalshiEX, LLC v. Assad, Ninth Circuit, August 28, 2026 Nevada The sports event contracts at issue were not “swaps” under the relevant statutory provision, so the court said they were not subject to the CFTC’s exclusive jurisdiction. The court also stated that CFTC regulations then prohibited offering contracts related to gaming on prediction markets. Affirmed dissolution of an injunction for sports event contracts and remanded for consideration of election contracts.
KalshiEX LLC v. Schuler and KalshiEX LLC v. Orgel, Sixth Circuit, September 25, 2026 Ohio and Tennessee Kalshi had not shown that its sports contracts met the statutory definition of a “swap” within the CFTC’s exclusive jurisdiction. The court alternatively held that, even assuming the contracts were swaps, the CEA did not expressly or impliedly preempt the gambling laws at issue. Affirmed denial of a preliminary injunction in Ohio; vacated the Tennessee preliminary injunction and remanded.

The holdings should be read with their geography and procedural posture in view. The Ninth Circuit addressed Nevada; the Sixth Circuit addressed Ohio and Tennessee. Neither ruling, on its own, settles the treatment of every contract in every state, and an injunction appeal is not the same as a final resolution of all claims in the underlying lawsuits.

Why contract classification and preemption are different tests

Does the contract fall within federal commodities law?

The classification question concerns the specific contract’s terms and statutory characteristics—not simply whether it is listed on a platform associated with the CFTC. Both appellate courts found that Kalshi had not established that the sports contracts before them were swaps within the CFTC’s exclusive jurisdiction. Those holdings address the contracts and records in those cases; they do not establish that no sports event contract could ever qualify as a covered instrument.

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Does federal law displace a state gambling law?

Preemption asks whether federal law prevents a state from applying its own law. The Sixth Circuit addressed that question separately and concluded that the CEA did not preempt the Ohio and Tennessee gambling laws at issue, even on the assumption that the contracts were swaps. That alternative holding matters: proving that a contract falls within a federal statutory category would not necessarily end every state-law dispute.

How the CFTC’s position changed in 2026

  1. February 4, 2026: earlier proposal and advisory withdrawn. The CFTC said it withdrew its 2024 “Event Contracts” proposed rule and did not intend to issue a final rule based on that proposal. It also said staff had withdrawn the September 30, 2025 advisory on certain contract markets. CFTC Chairman Michael S. Selig said the advisory “inadvertently created confusion and uncertainty for our market participants.”
  2. June 12, 2026: a different framework proposed. The CFTC proposed amendments concerning event-contract derivatives and the process for deciding whether contracts are contrary to the public interest. The proposal discusses contracts involving listed activities such as gaming and a structured review process. It is a proposal, not a final rule.

For sports contracts, the June proposal identifies sport-level integrity arrangements and information sharing as potentially relevant factors. It also describes sports-integrity monitoring, governing bodies, rules and disciplinary processes as matters that could inform the public-interest and monitoring assessment. The proposal does not itself establish that a particular sports contract is lawful in a particular state.

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The CFTC’s June 2026 proposed rule reported that trading volume across CFTC-registered prediction markets exceeded $25 billion in 2025. That is the agency’s figure for that year, stated in a proposed rule; it is not a measure of sports-contract volume alone.

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What this means for platforms and customers

The appellate decisions show why a platform’s federal status should not be treated as a blanket assurance that every sports contract is available or lawful everywhere. The legal analysis can depend on the contract, the state law being applied and the stage of the case. For customers, the practical step is to evaluate the actual contract and the service offering it, rather than infer legality or risk from the words “prediction market” or “event contract.”

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Review the contract before trading

The CFTC advises customers to look for disclosures covering risks, fees and other costs, trading rules, payout terms, and how settlement decisions are made. Contract prices reflect market participants’ perceived probabilities, not a guaranteed outcome; customers may also be able to trade out before settlement at then-current market prices. Those possibilities depend on the contract and market conditions.

Check that the website or app is authentic

The CFTC also advises customers to verify a trading website or mobile app’s authenticity, including by following links from the trading website. This is a separate check from understanding the legal status of a product: an authentic platform does not, by itself, resolve whether a particular contract may be offered in a given state.

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What remains unsettled

As of October 3, 2026, the cited appellate decisions had rejected Kalshi’s preliminary-injunction arguments in the states before those courts, while the CFTC’s new event-contract framework remained proposed. The decisions clarify how two circuits treated the classification and preemption questions in their respective disputes; they do not supply a universal answer for all sports contracts. Later litigation, appeals or final CFTC rulemaking could change the landscape.

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