44 state attorneys general challenge CFTC authority over sports event contracts
A new filing adds to the growing legal conflict over federal vs state jurisdiction over prediction markets.
U.S.- A coalition of 44 state attorneys general has submitted a letter to the Commodity Futures Trading Commission (CFTC) opposing the agency’s proposed rule on sports-related event contracts. The officials argue that the proposal would expand the CFTC’s authority into an area that has historically been regulated by individual states.
On June 10, the CFTC issued a Notice of Proposed Rulemaking proposing a formal framework for evaluating event contracts on prediction markets that involve “gaming,” war, terrorism or unlawful activity. The proposal would define “gaming” as recreational or entertainment activities governed by rules with outcomes depending on participants’ luck, skill or athletic ability and would restricts specific in-game sports contracts.
However, states and the CFTC are at odds over the regulation of the sector, which has seen a boom in activity in recent years. In their submission, the 44 attorneys general contend that the Commodity Exchange Act does not clearly authorise the CFTC to regulate sports event contracts. They argue the proposal would significantly expand federal authority into an area of economic and political importance that has long been managed by the states.
The coalition maintains that states have traditionally regulated gambling, including sports betting, and that the proposed rule conflicts with constitutional principles while exceeding the agency’s statutory powers. It claims the CFTC’s proposal is arbitrary and capricious in its current form.
One signatory is the Casino Association of New Jersey (CANJ), representing Atlantic City’s nine casinos. It argues that the CFTC previously maintained that contracts tied to sporting outcomes did not fall within the category of prohibited gaming contracts but that the proposed rule now appears to take the opposite position. It also noted that members of Congress and federal judges have previously questioned the agency’s approach to regulating event contracts.
