The Commodity Futures Trading Commission has filed an amicus brief in support of Crypto.com in its battle with the Nevada Gaming Control Board.
Tuesday’s filing in the U.S. Circuit Court of Appeals for the Ninth Circuit confirms the CFTC’s exclusive jurisdiction over the U.S. commodity derivatives markets, including sports event contracts offered by prediction market platforms.
The amicus brief outlines the legal history of the CFTC’s exclusive jurisdiction over all commodity derivatives markets, including prediction markets, and states that the courts and Congress have established and affirmed the CFTC’s role in regulating these markets.
“States and other federal entities do not have the authority to further regulate markets within the CFTC’s exclusive jurisdiction, and attempting to do so would have destabilizing economic effects,” the CFTC argues in the filing.
CFTC chairman Michael Selig said: “CFTC-registered exchanges have faced an onslaught of lawsuits seeking to limit Americans’ access to event contracts and undermine the CFTC’s sole regulatory jurisdiction over prediction markets. This power grab ignores the law and decades of precedent.
“Event contracts allow businesses and individuals to hedge event-driven risks, enable investors to manage portfolio exposure, and provide the public with information about the outcome of future events. These products are commodity derivatives and squarely within the CFTC’s regulatory remit. As I’ve said before, the CFTC has the expertise and responsibility to defend its exclusive jurisdiction over commodity derivatives, and that’s exactly what we’ll do.”
The intervention by the CFTC comes one month after the American Gaming Association (AGA) and Indian Gaming Association (IGA) sent a joint letter to members of the U.S. Senate and House of Representatives, calling for congressional action to address the “explosion” of unregulated sports event contracts being offered by prediction markets.
The AGA and IGA argue that sports event contracts undermine state law and tribal sovereignty and fly in the face of existing federal laws and regulations intended to protect consumers and the integrity of financial markets.
“These contracts are being offered in flagrant disregard of state laws, tribal sovereignty, the Commodity Exchange Act, and CFTC regulations,” said the two Associations. “They mislead consumers into believing that a sports bet is an investment, fail to protect the young and the vulnerable, open the door to money laundering, match fixing and insider trading. They rob state budgets and tribal finances while simultaneously forcing states and tribes to expend massive legal resources to defend their sovereignty.”
Gaming regulators in Nevada and several other gaming states have taken legal action to prevent prediction market platforms such as Crypto.com and Kalshi from offering sports event contracts to the residents of their states.