CFTC backs Kalshi in Ohio fight
- The CFTC filed a May 12 amicus brief backing Kalshi in its Sixth Circuit fight with Ohio, saying federal law — not state gambling rules — governs prediction markets. - The agency called the Ohio district court’s view “improperly narrow,” while this year it has also sued Arizona, Connecticut, Illinois, New York, and Wisconsin. - That matters because Washington is building a federal prediction-market regime even as leagues and lawmakers push for tighter insider-trading safeguards.
Prediction markets are having their “pick a lane” moment. Are these things basically sportsbooks in nicer clothes, or are they federally regulated derivatives markets? That argument has been simmering for months. On May 12, the CFTC made its position even clearer by backing Kalshi in its Ohio appeal and telling the Sixth Circuit that the state is stepping into a lane Congress already gave to the federal regulator. ### What happened in Ohio? The immediate news is an amicus brief. The CFTC filed it in *KalshiEx LLC v. Matthew T. Schuler, et al.*, the case now in the U.S. Court of Appeals for the Sixth Circuit after an Ohio federal judge refused to give Kalshi a preliminary injunction. The agency’s message was blunt — prediction markets sit inside the CFTC’s exclusive jurisdiction, and Ohio should not be using state gambling law to shut them down. (cftc.gov) ### Why does the CFTC care so much? Because this is not just one state fight. The CFTC has spent 2026 trying to stop a state-by-state breakup of the market. It sued Arizona, Connecticut, and Illinois on April 2, then moved against New York and Wisconsin later in April, all on the same theory: Congress chose a national rulebook for commodity derivatives, not a patchwork where every state can relabel a federally listed contract as gambling. (cftc.gov) ### What is Kalshi saying these contracts are? Kalshi’s whole business rests on the idea that an event contract is a derivative. You trade on whether some future event happens, prices move as odds move, and the market is run on a CFTC-registered exchange. The CFTC is leaning into that framing hard. In its February Ninth Circuit filing, and now again in Ohio, it said event contracts can help hedge risk, aggregate information, and fit within the Commodity Exchange Act’s broad definition of regulated products. (cftc.gov) ### So why do states and lawmakers keep pushing back? Because a lot of these contracts look and feel like sports betting. That is the catch. At an April House Agriculture Committee hearing, lawmakers pressed CFTC Chair Michael Selig on contracts tied to game outcomes and even player props, arguing that a wager on whether Jose Altuve hits a home run does not look much like a classic hedging tool. The political fight is really about that blurry boundary. (cftc.gov) ### Where does insider trading come in? Right at the center. In February, the CFTC’s enforcement division issued a prediction-markets advisory after two Kalshi-related cases involving misuse of nonpublic information. One trader was penalized and suspended for trading on his own candidacy. Another was a YouTube editor who likely knew unpublished video content before it went live and was hit with more than $20,000 in penalties and a two-year suspension. (legalsportsreport.com) ### Why are sports leagues suddenly involved? Because if sports contracts are going to exist, leagues want surveillance rules that look a lot more like sports-betting integrity controls. The NBA told the CFTC it wants athlete and team personnel trading bans, suspicious-activity reporting, data sharing with leagues, minimum age limits of 21, and tighter review of new market launches. That is basically the market maturing from “are these legal?” to “fine, then who watches the watchers?” (cftc.gov) ### And what about Congress? Congress is splitting. Chris Pappas on May 11 called for House Oversight subpoenas into prediction markets over suspected corruption and insider trading, pointing to suspicious trades around military events and coordinated accounts. So even while the CFTC is defending federal authority, lawmakers are asking whether that authority is strong enough — or whether these platforms need tougher rules and more transparency. (sbcamericas.com) ### Bottom line? The Ohio brief matters because it shows the CFTC is not improvising anymore. It is building a full federal defense of prediction markets — in court, in enforcement, and in rulemaking. But the stronger that federal claim gets, the less room there is for the industry to act like this is just a clever new trading product with none of the baggage of gambling. The price of winning the jurisdiction fight is going to be heavier surveillance, stricter compliance, and a lot less ambiguity. (cftc.gov) (pappas.house.gov)
