U.S. Appeals Court Rules Prediction Markets Are Not Swaps, Setting Stage for Supreme Court Review
A U.S. appeals court ruled that sports-related event contracts offered by prediction market platforms are not derivatives or swaps under federal law and therefore fall outside the jurisdiction of the Commodity Futures Trading Commission (CFTC). The decision from the Ninth Circuit Court contradicts a recent ruling by the Third Circuit, which had classified such contracts as CFTC-regulated swaps. This legal inconsistency is expected to lead to a Supreme Court review. The court rejected appeals from Kalshi and Crypto.com seeking injunctions against Nevada's enforcement actions, with the state claiming these platforms are offering unregulated gambling products. Robinhood also lost its bid for relief in this case. The CFTC has been actively defending federal oversight of all event contracts but was denied by the Ninth Circuit. The ruling is seen as a setback to prediction market operators and their regulator while benefiting traditional sports betting companies like DraftKings and Flutter Entertainment, whose shares rose following the decision.
Topics: CFTC Derivatives Regulation Prediction Markets Sports Betting