Share 
A coalition of 41 attorneys general has taken its fight over sports betting regulation directly to the Commodity Futures Trading Commission. In a formal comment filed April 30, the coalition challenged the CFTC’s jurisdictional reach over sports prediction markets, arguing that authority over those markets should rest with individual states.
Iowa Attorney General Brenna Bird was among the 41 signatories, joining legal officers from 40 other states and the District of Columbia in a rare show of bipartisan agreement.
Prediction markets are sidestepping state gambling laws
The dispute puts companies such as Polymarket and Kalshi under the spotlight. Both allow customers to put money on sports outcomes, covering everything from game winners to point spreads to individual athlete statistics. By any practical measure, those are sports bets.
These companies, however, do not call them that. They label their products as financial contracts — a distinction that has shielded them from the licensing requirements, consumer protections and tax rules that fully regulated sportsbooks must follow.
By filing with the CFTC, the attorneys general made their position clear: That argument does not hold up. The coalition contends these contracts are entertainment-based gambling rather than tools for financial risk management, putting them outside the CFTC’s jurisdiction.
Their position is that the nature of a product matters more than what a company chooses to call it. A wager on a game outcome does not become a financial instrument simply because it is packaged differently.
The case for state authority over sports betting
Bird made the state’s case plainly, arguing that states have historically managed their own gambling industries well and have earned the right to continue doing so. She pointed to Iowa as an example of how the system is supposed to work: State lawmakers define the legal framework, while the Iowa Racing and Gaming Commission oversees enforcement, including tax collection.
Bird also challenged the business strategy that some prediction market companies appear to be using, suggesting these firms have deliberately structured their products to slip past state oversight rather than comply with it. She pointed to court decisions that have already rejected that approach, with some judges finding that sports-related prediction contracts are subject to state gambling law.
The coalition’s letter asks the CFTC to formally acknowledge through its rulemaking process that sports contracts fall outside its jurisdiction — a step that would leave each state free to regulate or prohibit sports betting as its own laws provide.
Why states say the CFTC isn’t built to protect bettors
The coalition did not limit its argument to legal jurisdiction. It also highlighted the effects of unregulated sports betting on public health, noting that millions of Americans are already considered problematic or pathological gamblers.
State regulators, the attorneys general argued, are better suited to managing that risk than a federal commodities agency. State gambling commissions run licensing programs, maintain consumer complaint processes and require operators to contribute to problem gambling services.
The CFTC, by contrast, was designed to oversee derivatives and commodities trading — infrastructure never built with consumer protection in a gambling context in mind. The coalition warned that federal oversight of sports betting would ultimately strip bettors of the safeguards they currently enjoy under state law.
From California to Alabama: A rare bipartisan consensus
According to news by KIMT3, the letter was signed by attorneys general from:
- Alabama, Alaska, Arizona, Arkansas
- California, Colorado, Connecticut
- Delaware, the District of Columbia
- Hawaii, Idaho, Illinois, Indiana
- Kansas, Kentucky, and Louisiana
- Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi
- Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina
- Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island
- South Carolina, South Dakota, Tennessee
- Utah, Vermont, Virginia and Wisconsin
Attorneys general from both parties signed the letter, representing states that seldom align on policy. That range signals a concern that transcends political and geographic boundaries.
The CFTC must now respond — and the stakes are high
No final rule has been issued, and prediction market operators continue to function in the interim. Several state-level legal challenges are also advancing through the courts independently of the federal process.
The coalition’s filing carries real procedural force. As part of the official rulemaking record, the CFTC must address the comment before adopting any final regulations, giving the attorneys general a direct stake in the outcome — not merely a symbolic one.
The decision before the commission goes well beyond technical rulemaking. The CFTC must determine whether to claim authority over an industry that more than half the nation’s top legal officers say falls outside its jurisdiction. The states have made their position clear. How the CFTC responds will shape the future of sports betting regulation in America for years to come.
