Federal regulator supports Kalshi against appellate court dispute over prediction markets
The federal Commodity Futures Trading Commission has petitioned the Sixth Circuit Court of Appeals to determine that prediction markets fall under the agency's regulatory authority.
In an ongoing legal dispute between Kalshi and Ohio state authorities, the United States Commodity Futures Trading Commission has thrown its support behind the prediction market company, petitioning an appellate court to confirm the federal regulator's authority over such platforms.
On Tuesday, the CFTC submitted an amicus brief to the Sixth Circuit Court of Appeals, charging Ohio with "jurisdictional overreach" following the state's directive last year that Kalshi cease providing sports event contracts within its borders, characterizing these offerings as unauthorized sports betting.
In October, Kalshi initiated legal proceedings against Ohio officials, requesting that a federal court prevent both the Ohio Casino Control Commission and the state's attorney general from pursuing enforcement actions, though the court rejected this petition in March, prompting Kalshi to file an appeal.
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. As I've said repeatedly, the CFTC will not allow overzealous state governments to undermine the agency's longstanding authority over these markets.
CFTC Chairman Mike Selig
This legal confrontation represents one among numerous similar disputes establishing whether state authorities possess the authority to limit federally regulated prediction market operations and carries significant ramifications for leading prediction market operators including Kalshi and Polymarket.
The most recent amicus brief from the CFTC marks the agency's second intervention supporting a prediction market platform after it submitted a filing in the Ninth Circuit Appeals Court this past February in support of Crypto.com in its legal dispute with Nevada state regulators.
Within its filing, the CFTC contended that "Ohio's jurisdictional overreach into the Commission's sphere threatens regulatory upheaval," noting that the federal agency maintains oversight of event contracts that trade as swaps or binary options on designated contract markets (DCMs).
If States can restrict event contracts on sports, the Commission's longstanding jurisdiction over these other event contracts could be imperiled too. The Court should enforce the Commission's exclusive jurisdiction and hold that Ohio cannot regulate event contracts traded on DCMs.
This brief from the CFTC follows the agency's decision to file lawsuits against five different states in an effort to establish its regulatory authority over prediction market platforms, initiating legal action against state regulators in Wisconsin, New York, Arizona, Connecticut and Illinois.
These states had taken various enforcement actions, either issuing cease-and-desist orders or filing lawsuits against prediction market operators Kalshi, Polymarket, Crypto.com, Robinhood, and Coinbase, each of which operates as CFTC-regulated DCMs, concerning their provision of sports event contract offerings.
States cannot circumvent the clear directive of Congress. Our message to Wisconsin is the same as to New York, Arizona, and others: if you interfere with the operation of federal law in regulating financial markets, we will sue you.
Mike Selig, CFTC Chairman