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WHAT YOU NEED TO KNOW:
- In a rare amicus filing, the CFTC argues that sports-based event contracts are swaps subject to the agency's exclusive jurisdiction, preempting state gambling regulation.
- The CFTC adopts an expansive reading of the phrase "potential financial, economic, or commercial consequences" in the statutory definition of a swap and does not suggest that a materiality threshold applies to the potential consequences underlying a permissible event contract
- The CFTC warns that allowing state regulation of exchange traded event contracts would fragment derivatives markets and create uncertainty across a wide range of federally regulated products.
On February 17, 2026, the Commodity Futures Trading Commission (CFTC) filed an amicus curiae brief in the Ninth Circuit supporting North American Derivatives Exchange, Inc., d/b/a Crypto.com Derivatives North America (Nadex/Crypto.com) in its appeal of the District of Nevada's order denying its request to enjoin Nevada gaming regulators from taking action against its sports-based event contracts.1 The brief asserts that event contracts, which are commonly referred to as "prediction markets," are swaps subject to the CFTC's exclusive jurisdiction under the Commodity Exchange Act (CEA) and that state efforts to regulate or prohibit these contracts as gambling are preempted.
This brief is, on its own, noteworthy. The Commission files amicus briefs sparingly and has submitted only eight since the turn of the century. This stands in stark contrast to the Securities and Exchange Commission, for example, which has long maintained a routine practice of participating as amicus curiae in private litigation.2 Further, the CFTC's decision to file here is a marked departure from the agency's recent approach of refraining from intervening in these matters. For the first time, it is actively participating in event contract litigation.
The CFTC's decision to file the amicus brief demonstrates the agency's proactive approach to prediction markets following the transition to permanent leadership under Chairman Michael Selig. As Chairman Selig recently stated in an op-ed published by The Wall Street Journal, the CFTC "will no longer sit idly by while overzealous state governments undermine the agency's exclusive jurisdiction over these markets by seeking to establish statewide prohibitions on these exciting products."3 This posture may also suggest an institutional shift to more active advocacy for the CFTC's jurisdiction in other areas where regulatory authority is unclear or being established.
The CFTC's Three Core Arguments
1. The CEA Is Structured to Preempt State Gambling Laws
The CFTC's threshold position in its amicus brief is structural: Congress designed the CEA to occupy the field of exchange-traded commodity derivatives and to displace state-by-state gambling regulation for instruments listed and traded on a CFTC-registered designated contract market (DCM). In the CFTC's view, the core question for the court is not whether a particular sports-related contract resembles a wager under state law but whether it is a "swap" traded on a DCM, because once within CEA § 2(a)(1)(A)'s "exclusive jurisdiction," state gambling laws cannot be used to prohibit or condition trading on that DCM.4
As set forth in the CFTC's brief, Congress drafted and subsequently amended the CEA to expressly provide the CFTC exclusive jurisdiction over the futures and derivatives markets. Indeed, legislative history suggests this framework was adopted to "preempt[] the field insofar as futures regulation is concerned," to avoid "costly duplication and possible conflict of regulation or over-regulation," and to establish "a single unified program of regulation and exclusive CFTC jurisdiction over exchange-traded futures."5 And, following the adoption of Dodd-Frank in 2010, Congress extended the CEA's broad preclusive authority to the swaps markets.
While CEA § 2(a)(1)(A) contains a provision—often referred to as the "savings clause"—stating that "except as hereinabove provided," nothing in that section "shall ... supersede or limit" the jurisdiction of other federal or state authorities, the CFTC's position is that the savings clause preserves only traditional, non-conflicting state powers, such as antifraud enforcement or regulation of purely intrastate conduct. Even if field preemption were not decisive, the CFTC argues that state gambling bans would conflict with federal obligations, especially the requirement for DCMs to provide impartial market access to all eligible participants nationwide under 17 C.F.R. § 38.151(b).
2. The CFTC's Broad View of "Potential Financial, Economic, and Commercial Consequences"
The CFTC's second key argument focuses on the statutory definition of "swap." Under CEA § 1a(47)(A)(ii), a "swap" includes "any agreement, contract, or transaction" dependent on an event "associated with a potential financial, economic, or commercial consequence."
The CFTC adopts an expansive reading of the phrase "associated with a potential financial, economic, or commercial consequence."6 The CFTC emphasizes that the CEA requires only potential consequences, not proof of actual or substantial economic impact. In the sports context, the CFTC asserts that sporting events are major economic enterprises that generate significant commercial activity and can affect pricing, staffing, inventory, and resource allocation decisions by businesses and municipalities, and "all of these decisions pose economic risk, which is precisely the type of economic exposure that derivatives markets are designed to mitigate."7
Notably, the CFTC does not suggest that a materiality threshold applies to the potential financial, economic, or commercial consequences underlying a permissible event contract, in contrast to other amici in similar litigation who maintain that a swap must involve more than a de minimis economic consequence to be usable for hedging.8
Finally, the CFTC states that the court need not resolve "outer limits of the definition of a swap" or engage in "line drawing" between a swap and a wager to decide the appeal—instead, it "is sufficient to resolve this case that the transaction conducted on a CFTC-registered DCM qualify as swaps under the CEA."9
3. The "Market Disruption" Argument: Avoiding a Patchwork That Reaches Beyond Sports
The CFTC's third argument warns that a judicial ruling that sports event contracts do not qualify as swaps, or are outside the CFTC's exclusive jurisdiction, would cause significant market disruption. The CFTC argues that a ruling that permits state-by-state gambling regulation of derivatives listed on CFTC-registered DCMs would reintroduce the regulatory fragmentation that Congress sought to eliminate. Further, such a ruling would risk raising questions regarding the legality of event contracts generally, even those unrelated to sports. In the CFTC's view, even modest uncertainty about the scope of CEA preemption could spread quickly through interconnected markets, further reinforcing the importance for clarity on exclusive jurisdiction now that event contracts are widely listed and traded.
Conclusion
In its brief, the CFTC unambiguously takes an expansive view of its jurisdiction over event contracts. The agency's view is that state regulators err as a matter of law in questioning whether Congress expressed an intention to preempt state gambling laws when it granted the CFTC jurisdiction over event contracts. The CFTC asserts that Congress's decision to include event contracts within the definition of swap reflects an intent to subject those products to the "single unified program of regulation and exclusive CFTC jurisdiction" that applies to all federally regulated derivatives.
Courts continue to grapple with this question, and some courts have reached contradictory conclusions regarding the application of the CEA to these novel products.10 In addition to Crypto.com's Ninth Circuit appeal, there are a number of other pending cases regarding this issue. For example, Kalshi has a separate Nevada dispute before the Ninth Circuit, and New Jersey has appealed the grant of Kalshi's preliminary injunction to the Third Circuit.11 Therefore, multiple appellate courts are poised to provide their own views on the scope of the CEA and the permissible regulatory reach of state gaming authorities over prediction markets in the coming months.
Footnotes
1 North American Derivatives Exchange Inc. d/b/a Crypto.com | Derivatives North America v. State of Nevada et al., No. 25-7187 (9th Cir. Nov. 14, 2025).
2 See Amicus / Friend of the Court Briefs, U.S. Sec. & Exch. Comm'n, https://www.sec.gov/enforcement-litigation/amicus-friend-court-briefs (last visited Feb. 20, 2026).
3 Michael Selig, States Encroach on Prediction Markets, Wall St. J. (Feb. 16, 2026), https://www.wsj.com/opinion/states-encroach-on-prediction-markets-6eb43af9.
4 CFTC, Amicus Brief of Commodity Futures Trading Commission at 22, Nadex (9th Cir. Feb. 17, 2026) ("When an instrument is trading on a CFTC-regulated market as a 'swap' or 'future,' state gambling laws do not apply.").
5 Id. at 9-11.
6 Id. at 19 (emphasis in original).
7 Id. at 20.
8 Todd Phillips, Brief of Amicus Curiae in Support of Defendants-Appellees at 2, KalshiEx LLC v. Hendrick, No. 25‑7516 (9th Cir. Jan. 30, 2026).
9 Id. at 20.
10 Compare KalshiEx, LLC v. Hendrick, No. 2:25-cv-00575 (D. Nev. April 9, 2025) (granting preliminary injunction against enforcement of Nevada gaming laws), with North American Derivatives Exchange, Inc. v. State of Nevada ex rel. Nevada Gaming Control Board, No. 2:25‑cv‑00978‑APG‑BNW, slip op. (D. Nev. Oct. 14, 2025) (denying preliminary injunction and holding that the CEA does not preempt Nevada gaming regulation).
11 KalshiEx, LLC v. Hendrick, No. 25-7516 (9th Cir. Nov. 28, 2025); KalshiEx, LLC v. Flaherty, No. 25-1922 (3rd Cir. May 15, 2025).
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