Prediction Market Sports Bets Ruled Federal Swaps

A federal appeals court has ruled that sports bets placed on prediction markets like Kalshi are to be considered "swaps" under federal law, exempting them from state gambling regulations. The decision grants the Commodity Futures Trading Commission (CFTC) exclusive jurisdiction, preempting state laws, including New Jersey's prohibition on college sports betting. While the majority opinion emphasized the distinction between regulated gambling and federally overseen financial contracts, a dissenting judge argued the offerings are functionally identical to traditional sports wagers. This ruling is the first of its kind at the appeals court level and is expected to fuel ongoing legal debates over the regulatory status of prediction markets.