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The CFTC has been suing states that try to regulate or ban prediction markets, saying it alone has jurisdiction over them. The CEA gives the CFTC exclusive jurisdiction over swaps, defined as \u201cany agreement, contract, or transaction\u2026 that provides for any purchase, sale, payment, or delivery\u2026 that is dependent on the occurrence, nonoccurrence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or commercial consequence.\u201d<\/p>\n
Nelson wrote that sports event contracts offered on Kalshi are sports gambling, regardless of whether Kalshi calls them swaps. Quoting Shakespeare\u2019s Romeo and Juliet<\/em>\u2014\u201cthat which we call a rose by any other name would smell as sweet\u201d\u2014Nelson wrote that \u201cplacing sports bets, even when called by another name, is still gambling.\u201d<\/p>\n The broadest reading of the legal definition of swap \u201cmight cover the sports event contracts here and thus preempt Nevada law,\u201d but the broad reading proposed by Kalshi conflicts with the larger statutory scheme and has no limiting principle, judges wrote. \u201cCongress has spoken on the issue of gambling in other statutes,\u201d and did not repeal or amend those laws in the Dodd\u2013Frank Act, which gave the CFTC authority over swaps, the ruling said.<\/p>\n Nelson\u2019s ruling was joined by Judge Bridget Bade, while Judge Kenneth Lee wrote a concurring opinion. Lee said he \u201cagree[s] with the majority opinion that the more natural reading of \u2018event\u2019 under the statutory definition of a \u2018swap\u2019 would not include the outcome of a sporting event.\u201d<\/p>\n \u201cFew people would describe, say, the New York Mets\u2019 latest loss of a game as an \u2018event,\u2019\u201d Lee wrote. \u201cLikewise, I do not think the outcome of a typical sports game is \u2018associated with a potential financial, economic, or commercial consequence\u2019 as required under the definition of a swap. Going back to the Mets example, perhaps in an uber-technical sense a Mets\u2019 loss could have marginal economic impact as some fans guzzle more beer to drown away their sorrows. But it seems somewhat fanciful to say that the outcome of a single game in a 162-game season is likely \u2018associated\u2019 with a \u2018financial, economic, or commercial consequence\u2019 that one would expect in a swap contract.\u201d<\/p>\n