SCOTUS accepts sports event contract case

LATEST: The CFTC and DOJ ask a federal court to block Arizona from enforcing gambling laws against @Kalshi, arguing sports and event contracts are financial derivatives under federal jurisdiction, not gambling under state law.

Court Sides With Kalshi in Major Ruling for Prediction Markets -- WSJ

Huge win for @Kalshi (and all PMs) in the 3rd Circuit. This is the first appellate ct to weigh in and sets important precedent for related litigation. Key takeaways: • 1)CFTC has exclusive jurisdiction over swaps • 2)Sports event contracts are swaps • 3)Enforcing state gambling laws would undermine the purpose of the CEA (avoiding inconsistent patchwork of rules). • • Notable quotes below: • “The Act preempts state laws that directly interfere with swaps traded on DCMs. Kalshi’s sports-related event contracts are swaps traded on a CFTC-licensed DCM, so the CFTC has exclusive jurisdiction.” • • “Kalshi self-certified compliance with the applicable laws and regulations, so those event contracts were presumptively approved under federal law. See 7 U.S.C. § 7a-2(c)(1). To date, the CFTC has not determined that Kalshi’s sports-related event contracts are contrary to the public interest.” • • "The Act provides that the relevant event or occurrence need only be “associated with a potential financial, economic, or commercial consequence.” 7 U.S.C. § 1a(47)(A), (A)(ii). As the dissent concedes, “[a] plain reading of the Act’s text suggests that Kalshi’s sports-event contracts fit comfortably within the statutory definition." Dissent at 2. That is correct. The outcome of a sports event certainly can be associated with a potential financial, economic, or commercial consequence….Because Kalshi’s sports-related event contracts are traded on a CFTC-licensed DCM and depend on event outcomes associated with economic consequences, they fit within the Act’s definition of “swaps” subject to the CFTC’s jurisdiction." • • “Kalshi has demonstrated a reasonable chance of success in showing that the text of the Act preempts otherwise applicable state laws that purport to regulate sports-related event contracts on CFTC-licensed DCMs.” • • “Because Kalshi’s sports-related event contracts are swaps under the Act, the District Court properly defined the scope of field preemption as the regulation of trading on a DCM (a form of futures trading) rather than as gambling (a broader and traditionally state-regulated field). • • “Allowing New Jersey to enforce its gambling laws and state constitution would create an obstacle to executing the Act because such state enforcement would prohibit Kalshi, which operates a licensed DCM under the exclusive jurisdiction of the CFTC, from offering its sports-related event contracts in New Jersey. This state regulation is exactly the patchwork that Congress replaced wholecloth by creating the CFTC. Because that prohibition directly conflicts with the full purposes and objectives of the Act, we need not determine whether it would be impossible for Kalshi to comply with both state and federal regulations.”

""The Act provides that the relevant event or occurrence need only be “associated with a potential financial, economic, or commercial consequence.” 7 U.S.C. § 1a(47)(A), (A)(ii). As the dissent concedes, “[a] plain reading of the Act’s text suggests that Kalshi’s sports-event contracts fit comfortably within the statutory definition." Dissent at 2. That is correct."

“Kalshi’s sports-related event contracts are swaps traded on a CFTC-licensed DCM, so the CFTC has exclusive jurisdiction."

The federal government agreed that #SCOTUS should take up the case, arguing it presents the justices with a way to resolve a "recurring and important" circuit split.

US APPEALS COURT UPHOLDS INJUNCTION THAT SAYS NEW JERSEY CANNOT BAR KALSHI FROM OFFERING SPORTS-RELATED EVENTS CONTRACTS

US Appeals Court Upholds Injunction That Says New Jersey Cannot Bar Kalshi From Offering Sports-Related Events Contracts

I can appreciate that perspective, but to me it still looks like a switch-up from his confirmation hearing. • • Excerpt from my write-up of his hearing at the time: • — • • “Many lengthy legal opinions have been written on one word in a statute,” Selig said during his hearing Wednesday. “I would really want the benefit of understanding what the judges think about the issue. This could be one that works its way all the way to the top, so I’ll look to the courts on this issue.” • ... • Sen. Schiff brought up Thursday’s NFL game between the Buffalo Bills and Houston Texans as an example. If someone bets on the game through a prediction market platform, is that gaming? • • “It would be irresponsible for me to prejudge that issue,” Selig said, “I will look to the courts.” • • — • • I read this as him saying that he doesn't want to weigh in on what contracts qualify as "gaming" under the CEA before the courts. • • But to me, the CFTC taking a position in an ongoing court case is clearly 'prejudging the issue' because the CFTC is voicing an opinion before the judges do. • • Selig would probably argue that the CFTC suing states is purely about defending its jurisdiction over futures contracts—but the fact that they're defending their jurisdiction over sports contracts in particular says something. • • If the CFTC is going to eventually decide that sports contracts are gaming, then why sue to block states from making that determination themselves? • • Free link to the story I reference above: •

CFTC sues 3 states over prediction market regulatory authority

DOJ, CFTC Sue 3 States for Blocking Sports Prediction Markets

Supreme Court precedent from 1898 to play central role in arguments

Judge Denies Kalshi Injunction in Sports Betting Dispute With State Regulators

Kalshi suffers court loss in Ohio over sports betting lawsuit

Ohio judge rules that Kalshi is sports betting and must adhere to state law

You all may have seen we agreed to a short 2-week extension of the Nevada state court's TRO requiring us to block NV users. Although we disagree with the state court's actions and believe the TRO should be dissolved, we want to give the federal judge time to consider these…