Appeals Court Rules Prediction Market Sports Bets Are Federally Regulated Swaps

POLICY The U.S. Court of Appeals for the Third Circuit has ruled that sports betting contracts on federally regulated prediction markets qualify as swaps under federal law, placing them exclusively under Commodity Futures Trading Commission jurisdiction. The 2-1 decision issued Monday in a lawsuit brought by prediction market platform Kalshi against New Jersey affirms that the CFTC's exclusive authority over designated contract markets preempts state gambling laws and constitutional prohibitions on sports betting. New Jersey had sought to block Kalshi from offering contracts on collegiate and professional sports outcomes, arguing the activity violated state gambling restrictions. The appeals court majority rejected that interpretation, finding that federal commodity exchange law governs contracts traded on CFTC-regulated platforms regardless of their subject matter. The ruling has significant implications for prediction market operators including Kalshi and Polymarket, which have faced regulatory challenges in multiple states seeking to restrict trading on elections and sporting events.