The battle over prediction markets has reached another turning point. A bipartisan coalition of attorneys general from 44 states has formally urged the Commodity Futures Trading Commission (CFTC) to abandon its proposed rule and write a new one, arguing the agency is trying to regulate an area that belongs to the states.
The letter arrived as the public comment period officially closed, making it one of the most significant responses the CFTC has received so far. While prediction market operators have generally supported the proposal, state officials say the rule would give the federal government powers that Congress never intended the agency to have.
The Main Dispute is Who Has Authority
At its core, this isn't really a disagreement about whether prediction markets should exist. It's about who gets to oversee contracts for sports-related events. The attorneys general argue that sports gaming has historically been regulated by individual states, not the federal government.
In their view, the CFTC's proposal would dramatically shift that balance by placing more authority in Washington than the Commodity Exchange Act allows. The coalition is asking the commission to:
- Withdraw the current proposal
- Write a replacement rule that follows the Commodity Exchange Act
- Confirm that sports-related contracts remain subject to state regulation
Although six states did not sign the letter, support from 44 attorneys general makes it one of the largest coordinated challenges the CFTC has faced during this rulemaking process.
Opposition is Coming From Multiple Directions
The states aren't the only ones asking the commission to reconsider. Professional sports leagues, including the NFL, NBA, Major League Baseball, and Major League Soccer, have submitted comments expressing concerns about certain event contracts. Rather than focusing only on game results, the leagues pointed to contracts involving player injuries, roster moves, press conferences, and similar events that they believe could create integrity concerns.
Former Senator Christopher Dodd also criticized the proposal, saying Congress never intended the Dodd-Frank Act to turn the CFTC into the country's sports gaming regulator. Former CFTC Chairman Timothy Massad echoed that position, arguing the commission is moving beyond the responsibilities Congress originally assigned to it.
The Courts Still Haven't Settled the Issue
While regulators collect comments, judges across the country continue reaching different conclusions. Minnesota recently saw a federal judge temporarily block the state's new ban on prediction markets while litigation proceeds. Courts in Michigan and Washington, however, have blocked Kalshi from offering sports-related event contracts.
At the same time, a federal judge in New York declined to stop enforcement of that state's gaming laws. Those conflicting rulings show why this issue remains far from settled. Until appellate courts or the Supreme Court provide more definitive guidance, different states are likely to continue producing different legal outcomes.
The Trade Handle Prediction Markets Take
Reading through the latest wave of comments, one thing becomes obvious: this conversation has grown much bigger than prediction market companies themselves. State governments, professional sports leagues, former regulators, financial market participants, and consumer advocates are all trying to shape the industry's regulatory future.
The CFTC now faces the difficult task of reviewing thousands of comments before deciding whether to revise its proposal or proceed largely as written. Whatever path the agency chooses, the debate over federal versus state authority isn't going away anytime soon, and the next chapter will likely play out just as much in the courtroom as it does inside the CFTC.