The year the law split over prediction markets
Two federal appeals courts reached opposite answers within four months. What a sports organisation should do while the question sits unresolved.
Two courts, four months, opposite answers
In April 2026 the Third Circuit held, by two votes to one, that sports event contracts are "swaps" falling within the exclusive jurisdiction of the Commodity Futures Trading Commission, and that field preemption applies. State gaming law, on that reading, does not reach them.
On 28 August 2026 the Ninth Circuit decided KalshiEX, LLC v. Assad, No. 25-7516, and went the other way. The panel held that the district court had not abused its discretion in dissolving Kalshi's preliminary injunction, because Kalshi had not shown a likelihood that the Commodity Exchange Act preempts state gaming regulation as applied to its sports event contracts. Part of the reasoning was blunt: the contracts were not swaps because they were sports bets. The opinion, by Judge R. Nelson, affirmed in part and remanded in part.
Two federal appellate courts, four months apart, on the same question, with opposite answers. A split like that usually ends at the Supreme Court, and that is the expected next step. Nobody can tell you today which way it goes, and anyone who says otherwise is guessing.
What the Commission actually proposed
The CFTC published a Notice of Proposed Rulemaking, "Prediction Markets; Public Interest Determinations", in the Federal Register on 12 June 2026. It sets out a three-step framework for deciding whether an event contract involves gaming or another listed activity and, if it does, whether listing it is contrary to the public interest. That replaces the earlier approach of blanket prohibition with a test. Comments closed on 27 July 2026, and the proposal drew 1,443 of them.
The substance matters more than the mechanism. As proposed, the rule would disallow contracts on a specific play called or executed by a specific player or team, on injuries, on officiating decisions, and on pre-collegiate sport. It would permit contracts on final scores, point differentials, win-loss results, tournament advancement and statistical performance.
Leagues and unions filed. The NBA, in a letter dated 30 April 2026, argued for integrity-specific regulation and asked that contract markets be required to block athletes, game officials and other league and team personnel from trading contracts on their own league. The NFL said the proposal fell "significantly short", and called for bans on micro-bets, player props and award markets, stronger insider-trading rules, a prohibited-bettor registry and a minimum trading age of 21. Major League Baseball pressed for information-sharing arrangements with the relevant integrity monitoring organisation and for the use of official league data. Letters also came from the ATP Tour, the NCAA and the players' unions of the NFL, MLB, NBA, NHL and MLS. The NCAA has gone further, calling for college-related prediction markets to be suspended, on the ground that these markets lack the enforcement tools available in regulated sports betting.
Separately, an August 2026 CFTC staff advisory told designated contract markets that displaying bookmaker-style odds is "likely to mislead market participants" about the nature of the transaction, and warned against risk-free incentives and profit-guaranteeing promotions. Prices, staff said, should be shown as nominal values or percentages.
The states did not wait
Minnesota moved first. SF 4760 was signed on 18 May 2026 and took effect on 1 August, the first US state law banning prediction market contracts. The CFTC sued the state, and on 27 July a federal judge granted a preliminary injunction blocking the ban as likely preempted.
Wisconsin went the other way three days later. On 30 July a federal judge denied a CFTC injunction, leaving the state free to enforce its gambling law against prediction market platforms.
Then the litigation multiplied. In late July the Governor and Attorney General of New York sued Kalshi in state court, seeking approximately $36 billion, calculated as treble gains plus $100,000 per unauthorised offer. On 26 August the Connecticut Attorney General sued, arguing that sports event contracts are "no different than sports betting" and are not shielded from state consumer protection law. Arizona filed criminal charges against Kalshi, and the CFTC sued Arizona.
On 27 July a coalition of 44 state attorneys general told the CFTC that it lacks the statutory authority for what it proposes, and that the rule would "drastically expand federal regulatory authority" in an area states have traditionally regulated.
Every one of these matters is ongoing. None has produced a final answer.
Your rulebook probably says "betting"
Here is the part that sits inside your control while the courts work.
Read your participant rules. Most of them prohibit betting on your own sport, or wagering with a bookmaker, or placing a bet with a licensed operator. Those words were written when the only way to take a financial position on a match was through a betting operator.
An event contract bought on a designated contract market is not a bet placed with a bookmaker. It is a contract traded on an exchange, and in one circuit a court has just described the federal instrument as a swap. A participant who buys one may sit entirely outside the words you drafted. Disciplinary panels read the words.
The fix is not in the prohibition. It is in the definitions section: what counts as a wager, what counts as a market, and whether the rule attaches to the venue or to the economic position taken.
What to do while the law is unsettled
Define the instrument, not the operator. Cover any financial position on a competition outcome, however the counterparty is licensed or characterised, and wherever it is traded.
Extend the perimeter to the people around the athlete. Officials, coaching and medical staff, analysts and administrators hold the information that moment-level markets price.
Do not make legality the test. A rule that bites only on unlawful betting fails the moment a court holds the venue lawful.
Ask for participant blocking in commercial terms. The NBA has asked the regulator for it. A federation or club dealing with an exchange can ask for it in a contract now, without waiting for a rule.
Check what your monitoring actually sees. If your arrangement covers licensed sportsbook data only, exchange order flow is invisible to you.
What to watch
A petition for Supreme Court review, and whether it is granted. The CFTC's final rule, and whether the proposed exclusions on officiating decisions and specific plays survive it. What the Ninth Circuit's partial remand produces. And whether more states legislate, because after Wisconsin they have reason to believe a state law can hold.
Rewrite the definitions while the answer is unknown. That work is useful whichever way the courts go.
Sources
Related reading
RegulationWhat new criminal law changes
Australia and Kenya both criminalised competition manipulation in August, and the consequence for a federation is disclosure rather than deterrence.
RegulationBritain's Macolin decision
The UK signed the Convention in 2018 and never ratified it. Parliamentary scrutiny closes on 12 October 2026, and the practical effects are narrower than the debate suggests.
InsightPrediction markets are sport's next regulatory flashpoint
The CFTC withdrew its event-contract rule, then a World Cup suspension became a tradable market. What regulators and federations should prepare for.