be construed as gaming; they can even be construed as games played for stakes (cash prizes and trophies, for example).” Id. at *12. During oral arguments in the D.C. Circuit, Kalshi further clarified its definition of “gaming,” confirming to the judges that sports betting would be covered because “sports are games.” Thus, Sports Contracts clearly involve gaming, as evidenced by the District Court’s sound reasoning in KalshiEX , Congress’s clear intent and the CEA’s legislative history, and Kalshi’s on-the- record statements. 8 Accordingly, because Sports Contracts clearly involve gaming, they are prohibited under the CEA and its implementing regulations. 2. The CFTC may prohibit sports betting that is contrary to state law under the “Special Rule” provision covering “activity that is unlawful under any Federal or State law.” Section 40.11(a)(1) of the CEA’s implementing regulations also prohibits event contracts that involve “an activity that is unlawful” under any state or federal law. States’ police powers are an essential component of their sovereignty guaranteed by the Tenth Amendment of the United States Constitution. The longstanding authority of states to regulate matters of health, safety, welfare, and morals is fundamental to the federalist system enshrined in the Constitution. See Medtronic, Inc. v. Lohr , 518 U.S. 470 (1996). This is especially true with respect to state regulation of gambling. It is well established that the regulation of gambling is a core police power of the state. See Ah Sin v. Wittman , 198 U.S. 500, 505–06 (1905) (“The suppression of gambling is concededly within the police powers of a state.”); Johnson v. Collins Entm’t Co., Inc., 199 F.3d 710, 720 (4th Cir. 1999) (“The regulation of gambling enterprises lies at the heart of the state’s police power.”); Hawkeye Commodity Promotions, Inc. v. Vilsack , 486 F.3d 430, 439 (8th Cir. 2007) (“A state’s police power encompasses controlling gambling . . . .”); United States v. Washington , 879 F.2d 1400, 1401 (6th Cir. 1989) (“The enactment of gambling laws is clearly a proper exercise of the state’s police power . . . .”); WV Ass’n of Club Owners & Fraternal Servs., Inc. v. Musgrave , 553 F.3d 292, 302 (4th Cir. 2009) (“[R]egulating gambling is at the core of the state’s residual powers as a sovereign in our constitutional scheme.”). For over a century, the state police power to regulate gaming, specifically, has been affirmed by the Supreme Court and the federal government as a core exercise of state sovereignty. Sports betting is a form of gaming. 25 C.F.R § 502.4(c) (defining “Class III gaming” to expressly include sports betting); see also Is Sports Betting Considered Gambling? , Kindbridge (July 27, 2023) (accessible here). In 2018, the U.S. Supreme Court held in Murphy v. NCAA that the Professional and Amateur Sports Protection Act (“PASPA”), Pub. L. No. 102-559, was unconstitutional and that states could legalize sports betting. 584 U.S. 453, 486 (2018). According to the Congressional Research Service, since the U.S. Supreme Court’s ruling in Murphy , 38 states and the District of Columbia have regulated (and legalized) sports gambling. 9 Approximately 20 states prohibit online sports betting and nearly a dozen states prohibit all forms of sports betting. 10 8 On September 12, 2024, the CFTC appealed the District Court’s decision to the D.C. Circuit. That appeal is ongoing and the D.C. Circuit has not yet issued an opinion on the merits. KalshiEX LLC v. Commodity Futures Trading Comm’n , No. 24-5205 (D.C. Cir.). 9 See Sports Gambling and Consumer Finance, Congressional Research Service (Sept. 12, 2024) (accessible here). 10 States that prohibit all forms of sports betting include California, Alaska, Hawaii, Idaho, Utah, Texas, Oklahoma, Minnesota, Alabama, Georgia, and South Carolina. See The Complete Guide
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