Lawyers Say CFTC ‘Has the Edge’ Over States as Prediction Markets Fight Heads Toward Supreme Court Showdown

The battle for control over the prediction markets industry is on a collision course with the Supreme Court, according to attorneys tracking the litigation, with several telling CasinoBeats the Commodity Futures Trading Commission (CFTC) may hold a key legal advantage over the states pushing back against platforms like Kalshi and Polymarket.

“It is likely that the issue will ultimately be decided by the Supreme Court,” said Linda Goldstein, a partner at CM Law. “The lower courts remain split, with some rulings favoring the markets and others siding with the states.”

States Say Gambling, CFTC Says Swaps

The core dispute centers on whether Kalshi and Polymarket’s sports-related event contracts constitute unlicensed sports betting, as several state gaming regulators argue, or legitimate financial derivatives under the CFTC’s jurisdiction, as the agency and the platforms maintain. The CFTC has taken an aggressive litigation posture, filing suits against multiple states that have attempted to regulate or ban the platforms, arguing the Commodity Exchange Act preempts state gambling law where event contracts are concerned.

That approach appears to be gaining traction in at least one major venue. William Walsh, a partner at Benesch Law, pointed to the Third Circuit’s recent decision affirming a preliminary injunction against New Jersey’s attempt to police Kalshi’s sports contracts under state gambling law. “The CFTC’s active litigation approach, filing affirmative lawsuits against multiple states, demonstrates how high of a priority this is for the administration,” Walsh said. “And the courts seem to be sympathetic to the CFTC’s position.”

Sports Betting Is the Real Battleground

Adam Bjorn, CEO of iGaming firm Plannatech and operator of the Prime Sportsbook and Betcris platforms, framed the dispute in stark terms: “The question isn’t whether [prediction markets] are gambling. It’s who gets to regulate it. And on that question, the CFTC is winning.” He added that sports contracts specifically represent the industry’s most vulnerable point for federal preemption arguments, since states have licensed and taxed traditional sports betting for years — giving them a stronger historical claim to jurisdiction there than in other prediction market categories.

Congress Could Still Rewrite the Rules

Even a CFTC win at the Supreme Court might not be the final word. A bipartisan bill from Sens. Adam Schiff and John Curtis aims to amend the Commodity Exchange Act to explicitly reclassify sports-related event contracts as gambling, which would strip the CFTC of jurisdiction regardless of how the courts rule. “That means even a Supreme Court win [for the CFTC] could be undone legislatively,” said Josh Hamlet, founder of Clarity Tax Counsel. “Congress is the wildcard.”

Separately, a group of 17 senators has pushed to cut off the CFTC’s federal funding for its lawsuits against states, while Nevada’s congressional delegation has specifically fought to preserve state and tribal oversight of the sector. With billions of dollars in projected market growth at stake — analysts have pegged the prediction markets industry to reach $1 trillion by 2030 — neither side appears ready to back down before the courts, and possibly Congress, settle the matter.