Caroline Pham, Acting Chairperson Commodity Futures Trading Commission Page 10 of 13
(1) An agreement, contract, transaction, or swap based upon an excluded commodity… that involves, relates to, or references… gaming ….
(Emphasis added); see also 7 U.S.C. § 7a-2(c)(5)(C). However, even if the CTFC were to determine that Sports Contracts do not involve gaming—which they do—it would still have the authority to prohibit such contracts because they concern a “similar activity” to gaming. 7 U.S.C. § 7a- 2(c)(5)(C)(i)(VI); 17 C.F.R. § 40.11(a)(2). As discussed in more detail below, the CFTC has several reasons for determining, in its broad discretion, that Sports Contracts are contrary to the public interest. Accordingly, because Sports Contracts clearly involve gaming, or at the very least concern “similar activity” to gaming, they are therefore prohibited under the CEA and its implementing regulations. D. Sports Contracts Are Prohibited Because They Are Unlawful Under State Laws. 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 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) (“[T]he 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 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
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