FEDERAL VS STATE REGULATION
Caught in the middle: tribal tensions between federal and state law AS PREDICTION MARKETS ARE TESTED IN THE COURTS THERE ARE MORE QUESTIONS THAN ANSWERS FOR TRIBES AS HEIDI MCNEIL STAUDENMAIER REPORTS
S ince 2024, prediction markets have attracted – and continue to attract – much of the media spotlight. Throughout various courtrooms across the country, legal questions involving the Constitution, including federal preemption through the Supremacy Clause and state regulatory authority derived from the Tenth Amendment, are being fervently debated. At the core of the debate: are event contracts subject to state gaming regulation or are they financial products regulated by the Commodity Futures Trading Commission (“CFTC”)?
prediction market platform where users can create sports event contracts (“SE Contracts”) in advance of a real-world sporting event. The Commodity Exchange Act (“CEA”), which governs regulated derivatives exchanges (“DE”), created the CFTC as the sole regulatory authority with “exclusive jurisdiction” over DE across the United States. 1 Prediction market providers contend their offerings are financial instruments with prices set by buyers and sellers of the instruments, rather than sports wagering, and are traded on open markets rather than betting platforms. 2 Throughout the multiple lawsuits on this issue, Kalshi has argued that federal preemption shields prediction markets from state regulation. 3
Background and Arguments As everyone in the gaming world knows by now, Kalshi is a
1 Caitlin Vanderkarr & Eric L. Kintner, Event Contracts Versus Sportsbooks: Charting the Legal Divide in U.S. Gambling Law , Snell & Wilmer (Apr. 30, 2025); Heidi McNeil Staudenmaier & Caitlin Vanderkarr, Prediction Markets on Trial: Kalshi, Robinhood, and the Legal Crossroads of Sports Betting , Snell & Wilmer (2025); see also Daniel O’Boyle, Kalshi-NJ Judge: Congress Defines CFTC Swaps Broadly — It’s Not Our Job To Fix It , InGame (Sept. 11, 2025),https://www.ingame.com/kalshi-third-circuit-judge-oral-arguments/ 2 Charlotte Capewell, California’s Tribal Gaming Leaders Target Prediction-Market Apps, Complete iGaming (Oct. 21, 2025), https://completeigaming.com/californias-tribal-gaming-leaders-target-prediction-market-apps/. 3 Vanderkarr & Kintner, supra note 1; Staudenmaier & Vanderkarr, supra note 1; see also O’Boyle, supra note 1.
PAGE 34
IMGL MAGAZINE | DECEMBER 2025
Made with FlippingBook flipbook maker