Attorneys general from forty-four states are asking the Commodity Futures Trading Commission to revise its proposed rules for prediction markets. They believe the current proposal goes beyond what the commission is legally allowed to regulate and overlaps with areas usually handled by state governments.
Summary
- Attorneys general from 44 states have urged the CFTC to withdraw and rewrite its proposed prediction market rule.
- The coalition argued that regulating sports betting has traditionally been a state responsibility, not a federal one.
- The filing adds pressure as courts continue issuing conflicting rulings on sports prediction markets across the United States.
Attorneys general from 44 states, spearheaded by Ohio Attorney General Andy Wilson, have sent a letter arguing that the CFTC’s plan for betting markets on sports goes beyond its legal power. They are asking the CFTC to create a new set of rules that fully complies with federal law and the U.S. Constitution.
Just as the public comment period ended on the agency’s proposed changes to Rule 40.11, a new issue arose, complicating the CFTC’s attempt to create national rules for event-based contracts involving gaming and similar areas. The proposal has already received feedback from sports organizations, exchanges, lawyers, and those working in the cryptocurrency field.
In a letter, the attorneys general argued that the CFTC’s proposed rule exceeds its legal power. They urged the agency to revise the proposal to comply with both federal law and constitutional principles.
States say sports betting belongs under state oversight
The attorneys general stated that the plan would significantly increase federal control over gambling, an area traditionally regulated by individual states.
The letter explained that states have traditionally overseen gambling, like sports betting, but the federal government hasn’t. It further contended that the new proposal would allow the CFTC to control a matter with major financial and political consequences without explicit approval from Congress.
This role directly questions the CFTC’s traditional understanding of the Commodity Exchange Act. The Commission has consistently maintained in court cases related to sports prediction markets that federally traded derivatives are under its sole control and aren’t subject to different state gambling rules.
As more companies offer bets on sporting events through online prediction markets, legal battles are escalating across the U.S. Courts are trying to determine whether these platforms should be regulated as financial investments under federal law or as traditional gambling by individual states.
Court rulings continue pulling the dispute in different directions
Recent litigation has produced conflicting outcomes for prediction market operators.
A federal judge has temporarily stopped Minnesota from enforcing its ban on prediction markets. This means Kalshi and Polymarket can continue to operate in the state while a legal challenge to the ban moves forward.
Later that day, a different federal judge in New York refused to block the state from applying its gambling rules to Kalshi, meaning the company didn’t get the temporary reprieve it requested.
Several states are now challenging agreements for betting on sporting events. Recently, a judge in Michigan issued an order to stop Kalshi from offering these types of bets within the state. Similarly, a court in Washington State temporarily blocked Kalshi last week, determining that its offerings probably violate the state’s gambling laws.
Kalshi’s recent legal separation follows a previous defeat in New York. Earlier this month, a judge rejected Kalshi’s attempt to halt New York’s gambling regulations while their lawsuit is ongoing. Legal expert Daniel Wallach explained that this decision could make it harder for Kalshi to win cases in other states, as the court determined the federal agency overseeing commodities doesn’t have complete control and that states traditionally regulate gambling.
North Carolina is taking a different route. A new law, Senate Bill 257, which was signed on July 7th, clearly states that the federal government, through the CFTC, has complete control over prediction markets. It allows platforms registered with the federal government to begin operating in North Carolina on January 1, 2027. The law also includes a 6% tax on the fees earned from North Carolina residents using these platforms, and it’s also raising taxes on companies that offer legal sports betting in the state.
CFTC proposal has drawn criticism beyond state regulators
These statements from the attorneys general follow a recent request by the NFL to the CFTC. The NFL asked the agency to increase—not decrease—its monitoring of betting on sports predictions.
In a letter dated July 27th, the NFL informed the head of the Commodity Futures Trading Commission (CFTC) that while the proposed rules for event contracts include some helpful protections, they don’t go far enough to protect the fairness of games or the interests of fans.
The league proposed several changes, including stricter rules around contracts that could be affected by players or referees, as well as more time for reviewing new contracts before they take effect. They also want to clearly prohibit using confidential information for betting and require a list of banned bettors specific to the league. The NFL reiterated its support for banning margin trading related to sports, limiting advertising, and setting a minimum age of 21 for participation.
While the NFL hasn’t joined in yet, the National Hockey League and Major League Baseball are now working with platforms that allow fans to predict game outcomes. This shows how different major U.S. sports leagues are approaching this growing trend.
Rule 40.11 proposal remains under review
The recent statement from the attorneys general concludes one phase of the CFTC’s discussions about changes to its Rule 40.11. This rule would create a formal review system for contracts tied to events like games, war, terrorism, assassinations, and illegal actions.
The plan suggests the Commission would initially assess if a product is considered an event contract. If so, it would then check if the outcome of that contract relies on activities covered by the Commodity Exchange Act. Only contracts meeting both criteria would face further review to determine if they serve the public interest before regulators make a final decision about allowing them.
Just before the deadline for comments, the CFTC reminded exchanges that they shouldn’t submit generic, standard self-certifications for many event contracts at once. Instead, these markets need to detail the specific settlement process, legal reasoning, data used, and terms of each contract so regulators can review them separately.
2026-07-29 13:20