CFTC Rules and Kalshi Circuit Split Put Prediction Markets Before Supreme Court
Federal appeals courts now split on whether sports event contracts are CFTC-regulated swaps or state gambling, and the CFTC's October 2026 rules propose expressly redefining "swap" as courts and cert petitions collide.
Per Foley's November 2026 overview (the firm's own analysis, not independent reporting of the holdings), federal appellate courts are divided on whether sports-linked event contracts traded on CFTC-designated contract markets qualify as "swaps" under the Commodity Exchange Act and whether CFTC jurisdiction preempts state gambling law. The Third Circuit (KalshiEX v. Flaherty) held the contracts likely are swaps and that field and conflict preemption barred New Jersey from enforcing its gambling laws. The Ninth Circuit (KalshiEX v. Assad) reached the opposite conclusion, characterizing team-winner contracts as sports bets and pointing to geofencing as a workable compliance measure. On September 25, 2026, the Sixth Circuit joined the Ninth Circuit in the consolidated Ohio and Tennessee appeals (KalshiEX v. Schuler and Orgel), and Kalshi filed an en banc rehearing petition on October 9; a Fourth Circuit decision is expected. Meanwhile, on October 9 the CFTC released a proposed rule amending the "swap" definition to include event contracts and a companion interim final rule excluding casino-style gambling products offered by state- or tribally licensed operators. Sophisticated counsel should watch the comment period, party requests to stay rulings pending rule effectiveness, and whether the Supreme Court grants review: platform operators, sportsbooks, state regulators, leagues and trading clients each face different exposure depending on which side prevails.