are swaps under the CEA and that the CEA therefore pre-empts any conflicting state law. 31 At the district court level, such DCMs have been successful in roughly half of these cases. 32 Several cases concerning event contracts are currently pending before the Third, Fourth and Ninth Circuit Courts, 33 and the CFTC has now officially added its voice to this debate. In a speech delivered in January 2026, CFTC Chairman Michael S. Selig announced the CFTC’s intent to assert exclusive jurisdiction over event contracts. On February 17, 2026 the CFTC filed an amicus brief to the Ninth Circuit reaffirming its exclusive jurisdiction over prediction markets. 34 In the brief, the CFTC argued that the “exclusive jurisdiction” provision of section 2(a)(1) of the CEA pre-empts application of state gambling laws to event contracts trading on DCMs governed by the CEA, irrespective of whether the question is evaluated as a matter of field pre-emption or conflict pre- emption. 35 If the circuit courts are unable to come to a consensus on the issue of CFTC pre-emption, it is likely the matter may reach the Supreme Court. 36
Prediction Markets, Illegal Trading Practices and the DOE Advisory
The potential conflict between state and federal legal regimes for prediction markets is only one of the controversies surrounding prediction markets. Another set of questions concerns the use of “insider” or material non-public information on prediction markets. Recent cases alleging such conduct have prompted legislative and regulatory efforts to protect the integrity of prediction markets and is likely to be an important element of future rulemaking. 31 See, e.g., KalshiEX LLC v. Martin , No. 1:25-cv-01283 (D. Md. 2025); Robinhood Derivatives, LLC v. Dereitzer et al ., No. 2:25-cv-01541 (D. Nev. 2025); Coinbase Financial Markets, Inc. v. Tong et al ., No. 3:25-cv-02121 (D. Conn. 2025). 32 However, in recent weeks several district courts have ruled against DCMs that offer event contracts. On March 9, 2026, an Ohio district court denied Kalshi’s request to block Ohio state regulators from applying state gaming laws to event contracts listed on Kalshi because such contracts have not been demonstrated to constitute “swaps” such that they are subject to the CFTC’s exclusive jurisdiction. KalshiEX LLC v. Schuler et al ., 2026 WL 657004 (S. D. Ohio Mar. 9, 2026). Similarly, on March 10, 2026, a Michigan district court denied Polymarket’s request to block Michigan state regulators from applying state gaming laws to event contracts listed on Polymarket, holding that such event contracts do not constitute “swaps” as defined under the CEA. Opinion and Order Denying Plaintiff’s Motion for a Temporary Restraining Order, QCX, LLC v. Nessel et al. , No. 1:26-cv-00710, ECF No. 17 (W. D. Mich. Mar. 10, 2026). 33 E.g., KalshiEX, LLC v. Flaherty, No. 25-1922 (3d Cir. 2025); KalshiEX, LLC v. Hendrick , No. 25-7516 (9th Cir. 2025); KalshiEX, LLC v. Martin , No. 25-1892 (4th Cir. 2025). 34 Amicus Brief of Commodity Futures Trading Commission, a Federal Government Agency, in Support of Appellant and in Support of Reversal, North American Derivatives Exchange, Inc. d/b/a Crypto.com v. The State of Nevada, et al ., No. 25-7187, Dkt. 37.2 (9th Cir. Feb. 17, 2026), available at https://www.cftc.gov/media/13261/amicusbrief_02172026/download. 35 Id. at 21. In the brief, the CFTC asserted that “[s]tates cannot invade the CFTC’s exclusive jurisdiction over CFTC- regulated [DCMs] by re-characterizing swaps trading on DCMs as illegal gambling.” Id. at 2. The CFTC also argued that if the Ninth Circuit were to hold that sports event contracts are beyond the CFTC’s exclusive jurisdiction, such a holding would have a destabilizing effect on prediction markets as a whole. Id. at 28. 36 The Supreme Court has consistently recognized that federal law can either expressly or impliedly pre-empt state law. E.g., Gade v. Nat’l Solid Wastes Mgmt. Ass’n , 505 U.S. 88, 98 (1992). Implied pre-emption may occur either because a comprehensive scheme of federal regulation precludes state regulation (“field pre-emption”) or because federal and state law directly conflict with one another (“conflict pre-emption”). Id.
March 2026 / Page 12
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