Caroline Pham, Acting Chairperson Commodity Futures Trading Commission Page 11 of 13
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 Sports Contracts effectively enable citizens in every state to gamble on sports online, including in states that have enacted laws prohibiting sports betting or on tribal lands. Therefore, they are in direct conflict with state laws that prohibit retail or online sports betting and allowing them to be traded on a federal exchange would usurp a core police power of states to regulate gaming within their borders. Section 40.11(a)(1) of the CEA’s implementing regulations thus prohibits Sports Contracts because Sports Contracts involve an activity—sports betting—that is unlawful under many states’ laws. 11 E. Sports Contracts Are Prohibited Because They Are Unlawful Under the Federal Wire Act and the Indian Gaming Regulatory Act. Section 40.11(a)(1) of the CEA’s implementing regulations also prohibits event contracts that involve “an activity that is unlawful” under any federal law. In this case, the Sports Contracts are prohibited by section 40.11(a)(1) because they are unlawful under the federal Wire Act. 18 U.S.C. § 1084. Under the Wire Act, no one may “knowingly use a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers . . . on any sporting event or contest . . . .” Id. § 1084(a). U.S. Courts of Appeals and the U.S. Department of Justice (“DOJ”) have interpreted the Wire Act to prohibit interstate online sports betting. 9 See Reconsidering Whether the Wire Act Applies to Non-Sports Gambling , 42 Op. O.L.C. 158 (Nov. 2, 2018) (accessible here); Whether the Wire Act Applies to Non-Sports Gambling , 35 Op. O.L.C. 134 (Sept. 20, 2011) (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 to States Where Sports Betting is Legal in the US , Responsible Gaming (last visited Feb. 11, 2025) (accessible here). 11 A distinction could be made between contracts involving illegal activity and illegal contracts involving legal activity, the latter of which would encompass Sports Contracts (sports events are, by and large, not illegal activities) and could theoretically be exempt from the “Special Rule” and CFTC’s implementing regulation. However, the prohibition merely requires the contract to “involve” illegal activity; a contract necessarily involves the act of entering into it. See Involve , Merriam-Webster Dictionary (defining the term “involve” to mean “to engage as a participant” and “to oblige to take part”) (available here).
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