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State of Play’s TL;DR
- Crypto.com and Robinhood have asked the U.S. Supreme Court to decide whether federal derivatives law or state gambling laws govern sports prediction markets.
- Federal appeals courts have reached opposite conclusions.
Crypto.com and Robinhood have asked the US Supreme Court to step into the growing fight over sports prediction markets.
The key question is whether these contracts are governed by federal derivatives law or can still be regulated by states as gambling.
The petitions put a national spotlight on a legal split that already runs through multiple courts and regulators. For gambling stakeholders, the outcome could help determine how sports event contracts are treated across the US.
Two petitions ask SCOTUS to resolve a circuit split
Crypto.com’s North American Derivatives Exchange filed a Supreme Court petition on Sept. 11. Robinhood also filed a separate petition asking the Court to review a Ninth Circuit decision tied to Nevada.
At the center of both filings is a conflict between federal commodities law and state gambling regulation. Crypto.com argues that federally regulated prediction markets should remain under the Commodity Futures Trading Commission’s jurisdiction. Robinhood similarly argues that its sports-related event contracts belong within federal derivatives regulation.
The dispute has widened because federal appeals courts have not reached the same conclusion. The Third Circuit found that Kalshi’s sports contracts fall within federal derivatives regulation. The Ninth Circuit reached the opposite result, ruling that sports event contracts do not qualify as swaps under the Commodity Exchange Act and rejecting arguments that federal law pre-empts Nevada’s gambling rules.
Why the Ninth Circuit ruling matters
The Ninth Circuit also concluded that existing CFTC rules prohibit designated contract markets from listing contracts involving gaming. That ruling has become a major obstacle for operators trying to offer sports-event contracts through federally regulated exchanges.
Robinhood has partnered with Crypto.com and OG.com to route certain football contracts through a federally regulated exchange, making the legal question especially important for how those products may be offered.
The broader fight also includes Kalshi and the CFTC. Kalshi has asked for an en banc rehearing in the Ninth Circuit after the panel ruled against its sports contracts, and the CFTC joined Kalshi in challenging the court’s reading of the agency’s regulatory framework.
New Jersey joins the Supreme Court battle
The Supreme Court pressure is not coming only from operators. New Jersey filed its own petition involving Kalshi and argues that sports prediction market contracts should remain subject to state gambling laws.
For now, the Supreme Court has not agreed to hear any of the cases. If the justices do take one or more of them, they could decide whether sports prediction markets are treated primarily as federally regulated financial products or as offerings that states may police under gambling law.
Based on reporting by Jonathan Rodriquez for Betting News.
