The Commodity Futures Trading Commission has formally asserted exclusive federal jurisdiction over prediction markets in a new amicus brief submitted to the US Court of Appeals for the Ninth Circuit, escalating an ongoing regulatory conflict with state authorities. The filing comes in a case involving Crypto.com and the state of Nevada, where the platform is seeking to block state restrictions on its sports-event contracts.
In its brief, the agency argued that Congress granted the CFTC sole authority over futures and swaps under the Dodd-Frank framework, a definition it says includes event contracts tied to measurable outcomes such as sports results. The regulator maintained that these instruments function as commodity derivatives rather than gambling products, placing them squarely within federal oversight rather than state gaming laws.
Federal Jurisdiction Debate Intensifies
The dispute highlights a growing jurisdictional battle as prediction markets rapidly expand in scale and mainstream adoption. Platforms such as Kalshi and Polymarket have seen significant growth in trading volumes, particularly following heightened political and macroeconomic event speculation over the past year.
A lower court previously ruled that certain sports-event contracts were not under the CFTC’s authority, opening the door for state-level regulation. The agency’s appeal and accompanying brief signal a broader effort to prevent a fragmented regulatory landscape that could subject prediction market operators to a patchwork of gaming and derivatives rules across jurisdictions.
CFTC leadership has framed state litigation as regulatory overreach, emphasizing that event contracts can serve hedging and risk-management functions similar to traditional derivatives. The agency also stressed that these contracts clear through established financial infrastructure and include investor protections not typically associated with casino-style betting products.
Policy Shifts and Congressional Scrutiny
The filing arrives amid shifting policy direction at the CFTC, which recently scrapped earlier rulemaking efforts that sought to restrict certain event contracts deemed contrary to the public interest. That reversal suggests a more innovation-friendly stance toward emerging financial instruments tied to real-world events and digital platforms.
Lawmakers on Capitol Hill have simultaneously increased scrutiny of prediction markets, raising concerns about contracts linked to geopolitical events, sports outcomes, and political developments. Some policymakers argue these markets may resemble sportsbook wagering and risk bypassing state consumer protections and tax regimes.
From an institutional perspective, the jurisdictional outcome could shape how financial markets integrate event-driven derivatives into broader trading ecosystems. A clear federal framework may encourage institutional participation and product development, while continued state-level challenges could slow platform expansion and introduce compliance complexity.
The case is also being closely watched by crypto-native trading firms and fintech platforms, which increasingly view prediction markets as a convergence point between derivatives, data markets, and decentralized finance. A definitive ruling on federal authority could establish a precedent that influences regulatory treatment of future onchain and hybrid financial products.
