Attorneys General, Atlantic City Casinos Tell CFTC It Lacks Authority to Regulate Sports Trading

Opposition to the United States Commodity Futures Trading Commission’s (CFTC) oversight of sports prediction markets continues to grow, with all but six state attorneys general and Atlantic City’s nine casinos joining the coalition challenging the agency’s claimed regulatory authority.

The CFTC’s public comment period regarding its proposed rule amendment concerning event contract derivatives concluded on July 27. Ahead of the deadline, 44 state attorneys general and the Casino Association of New Jersey (CANJ), which represents the nine casinos in Atlantic City, submitted testimony opposing the independent federal agency’s desires to solidify its authority over sports prediction markets.

Federally regulated prediction markets holding Designated Contract Market (DCM) licenses from the CFTC began offering trading on sports events in late 2024. Users can buy and sell shares of sports outcomes, like whether the Los Angeles Dodgers will win tonight.

CFTC Sports Trading Opposition

Prediction markets and the CFTC claim sports trading allows fans to use their insights for financial gain, not unlike a savvy Wall Street trader.

“While some may harbor skepticism about innovative financial products, we firmly stand by our jurisdiction and remain committed to protecting it,” CFTC Chair Michael Selig said in May.

The 44 state attorneys general and Atlantic City casinos agree with the American Gaming Association that the Commodity Exchange Act (CEA) does not provide for the CFTC to regulate gaming, which has historically included sports betting.

“The CFTC in the Proposed Rule goes well beyond its statutory authority. The rule would drastically expand federal regulatory authority in an area of major economic and political consequence that states have traditionally regulated. And no clear statutory text from the CEA provides the CFTC such authority,” said the attorneys general.

“States have long regulated gambling—including sports bets. The federal government has not,” they argued. “The Proposed Rule goes beyond the CFTC’s statutory powers, is in tension with the Constitution, and would otherwise be arbitrary and capricious in its current form.”

The Atlantic City casinos shared similar opinions. The CANJ submission said the CFTC has failed to “address the elephant in the room” in that the CEA prohibits the trading of gaming.

“Federal judges and members of Congress around the country have demanded explanations for this dereliction. The CFTC has answered merely that contracts that pay off based on sports outcomes are not ‘gaming’ contracts such that they are barred under current regulations. The Proposal, of course, now takes the opposite view,” the CANJ comment letter declares.

What is the Proposal?

The public comments are in response to the CFTC proposing a rule that would be more favorable to its regulatory authority claims regarding sports trading.

Specifically, the proposed rule defines gaming as games of random chance and events contrary to the public interest.

“That a contract involves the outcome of a sports event, however, would militate against a finding that the contract is contrary to the public interest. In the CFTC’s view, such contracts ‘may serve price discovery functions and provide meaningful information,'” the Congressional Research Service summarized.

There is no public timeline for when the proposed rule might go into effect, which would be at least 60 days from being published in the Federal Register.