UMVA has learned that a fierce jurisdictional showdown is erupting as federal regulators step into a courtroom battle over prediction markets, backing Kalshi’s fight against Rhode Island’s bid to block sports‑related event contracts.
The Commodity Futures Trading Commission, alongside the United States, filed a motion on Thursday to intervene in a Rhode Island district court case, arguing that the state’s gambling statutes cannot eclipse the federal framework that governs derivatives.
At the heart of the dispute lies a stark question: can a state government wrest control from the CFTC and enforce its own gaming laws against exchanges that are already regulated under federal law?
Kalshi, a CFTC‑registered exchange, sued Rhode Island after the state moved to curb trading tied to sports outcomes, and the state retaliated with its own enforcement actions against both Kalshi and rival platform Polymarket.
Rhode Island alleges that these platforms facilitate gambling by letting bettors wager on game results and player performances under the veneer of “event contracts” on “prediction markets.” The state’s Attorney General has demanded that the platforms “stand down.”
Federal officials counter that such contracts are not games of chance but derivatives products, falling squarely under the Commodity Exchange Act and the exclusive jurisdiction of the CFTC.
In a striking excerpt from the filing, the CFTC argues that Rhode Island’s demand for the exchanges to cease offering federally approved financial products intrudes on the congressional scheme designed to oversee the entire derivatives industry.
Recent appellate precedent bolsters the CFTC’s stance, with a court finding that Kalshi’s sports‑related contracts, traded on a licensed exchange and tied to economic outcomes, qualify as “swaps” subject to federal regulation.
This clash follows a wave of similar battles across Arizona, Connecticut, Illinois, Minnesota, New York and Wisconsin, where states have tried to curtail prediction market offerings, prompting the CFTC to defend a unified national regulatory regime.
CFTC Chairman Michael S. Selig warned that the onslaught of state lawsuits threatens Americans’ access to event contracts and undermines the agency’s sole regulatory authority.
Now, the CFTC is urging the Rhode Island court to grant its intervention, seeking a decisive affirmation of its exclusive authority over federally regulated event contracts and the exchanges that list them.
