Everyone wants SCOTUS to take up prediction markets: State of Crypto
The U.S. Supreme Court hasn't yet indicated whether it will take up cases surrounding prediction markets, but there are now several amicus briefs, an interim final rule and a rule proposal.
A number of parties filed amicus briefs to the Supreme Court of the United States last week, urging it to take up a case on whether sports-based prediction market contracts are swaps, or not. And on Friday, the CFTC put out two proposals (one of which is now in effect) outlining its own thoughts on the matter.
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Former Senator Chris Dodd, former Commodity Futures Trading Commission (and Securities and Exchange Commission) Chair Gary Gensler, the National Football League, 39 states (and the District of Columbia), 145 tribal nations and various other parties filed amicus briefs to the Supreme Court urging it to take up this case, and with many arguing that sports-based prediction market products aren't swaps and shouldn't be regulated by the CFTC.
This newsletter covered the possibility of the Supreme Court wading into prediction markets a month ago. That calculus hasn't changed; there is now a major circuit court split, with two appellate courts ruling that prediction markets touching sports are actually gambling products that should be regulated by the states, and one appellate court ruling it's a CFTC issue.
Most of the amicus briefs filed last week urged the Supreme Court to side with the states; that is, rule that at least sports-related prediction markets are actually gambling products that should be regulated at the state level and not the federal level.
Former Senator Chris Dodd, whose name appears on the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act at the center of this argument, said in a brief that the law was not intended to give the CFTC the authority to usurp state governments and their ability to regulate gambling.
The filing disagreed with the Third Circuit Court of Appeals panel which ruled 2-1 that the CFTC had jurisdiction over swaps and prediction markets covering sports, saying that there is a distinction between derivatives as financial instruments and sports wagers.
"Parlays that chain together multiple wagers — often on point spreads or player performances in different games, in different cities, in different sports — do not facilitate hedging or price discovery," the filing said, pointing to one example of sports-related prediction markets that have been popular. "Nor are they 'associated with' the type of 'potential financial, economic, or commercial consequences' required to qualify as swaps under the CEA."
Dodd's brief then took issue with the CFTC's argument that it has "exclusive jurisdiction" over these products.
"Nor is the CEA’s grant of 'exclusive jurisdiction' to the CFTC an express preemption provision immunizing every contract listed on a DCM from otherwise applicable state and tribal law. Rather, it identifies the CFTC as the federal regulator of covered financial instruments," his filing said.
Former CFTC Chair Gary Gensler, who also played a key role in drafting regulations implementing Dodd-Frank, similarly argued that the law did not grant the CFTC authority to preempt state gambling laws. He's made a similar argument in an appellate case as well.
The NFL argued it has a vested interest in the outcome of this case, given the importance of sports betting in, well, sports. The league took aim at what it described as the CFTC's "laissez-faire" approach to this issue, as well as the broader issue of there being a divergence in how states regulate gambling companies and how the CFTC regulates designated contract markets (the type of license prediction market providers have).
On Friday, the CFTC proposed an interim final rule and a separate proposal aiming to clarify its interpretation of how these products fall into the definition of a "swap." The agency said casino-style gambling falls outside its definition of a swap, but event contracts remain within it. And the regulator wants to formally include sports, politics, cultural and weather-related events as being part of event contracts that are counted as swaps.
Kalshi asked for, and was granted, an extension to file a response to the Supreme Court. Its deadline is now Nov. 9, 2026.
If you’ve got thoughts or questions on what I should discuss next week or any other feedback you’d like to share, feel free to email me at [email protected] or find me on Bluesky @nikhileshde.bsky.social.
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Asanat Analysis — Why it matters
Prediction markets occupy a regulatory gray zone that has frustrated participants for years. The CFTC's interim final rule and pending rule proposal represent the agency's attempt to define which prediction market activities fall under its jurisdiction, but legal uncertainty persists because the underlying Commodity Exchange Act was written before digital markets existed. Multiple amicus briefs signal that stakeholders across finance, academia, and policy want the Supreme Court to clarify whether prediction markets are speech-protected political forecasting tools or regulated derivatives—a distinction with trillion-dollar implications for market structure.
A SCOTUS ruling would likely settle whether platforms like Polymarket can operate with reduced compliance friction in the U.S., or face the same surveillance and position-limit regimes as traditional derivatives exchanges. The proliferation of briefs suggests this case has attracted attention from incumbents (traditional exchanges), libertarian organizations, academic economists, and tech platforms—each with conflicting interests. History shows high court decisions on financial instruments (see: SECs v. W.J. Howey Co., or Dodd-Frank litigation) reshape entire sectors; prediction market clarity could accelerate mainstream adoption or constrain the ecosystem depending on the ruling's framing of decentralization and intent.
The interim rule already exists, meaning some regulatory pathway is in motion regardless of SCOTUS. However, Supreme Court involvement signals Washington believes the stakes justify constitutional-level clarity rather than administrative settlement.