A Supreme Court decision on sports event contracts could reshape the regulatory landscape for prediction markets—but a win for state regulators wouldn’t necessarily end the fight. CM Law Partner Linda Goldstein explains what operators, regulators, and businesses should watch.
What happens if the U.S. Supreme Court rules that sports event contracts offered by prediction markets aren’t “swaps” under the Commodity Exchange Act? The answer could have significant implications for prediction market operators, state regulators and traders—and the fallout may extend beyond sports.
In a recent DeFi Rate article, our Partner Linda Goldstein breaks down the potential consequences of a ruling in the ongoing Kalshi v. Flaherty and Kalshi v. Assad litigation. Her analysis highlights a key point: a decision on whether sports event contracts qualify as swaps may be consequential, but it may not settle the legal questions surrounding prediction markets.
One ruling, multiple paths forward
If the Court determines that sports event contracts aren’t swaps, operators could lose one important argument for federal preemption of state gambling laws. But that wouldn’t automatically make these contracts illegal nationwide. Other federal-law arguments may remain available, and the outcome could depend on the language of the Court’s opinion and the laws of individual states.
As Linda explains, “A ruling that the contracts are not swaps would not make them illegal everywhere. It would make each state’s own law decisive, and the breadth of the Court’s reasoning would determine what paths remain.”
For operators, that distinction matters. A decision could trigger new enforcement efforts, additional litigation, and an urgent need to assess where their products can legally be offered. Linda advises operators to evaluate each state’s legal framework carefully—and to consider suspending sports contracts promptly where there is no clear legal basis to operate, rather than waiting for enforcement.
The ripple effects could reach beyond sports
The implications may not stop with sports-related markets. Depending on the Court’s reasoning, state attorneys general could use the decision to challenge other event contracts, including election-related markets.
But the legal analysis won’t necessarily be identical. As Linda notes, election contracts may involve financial consequences tied to tax, trade, and regulatory policy—factors that could distinguish them from contracts based on a game’s final score. The scope of any future challenges will depend heavily on how the Court explains its decision.
The Commodity Futures Trading Commission’s authority could also be affected. Following the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo, agencies cannot rely on judicial deference to their interpretations of ambiguous statutes. If the Court concludes that sports event contracts fall outside the statutory definition of swaps, the CFTC cannot simply redefine them to restore authority that the statute does not provide.
What should prediction market operators do now?
For businesses operating in this evolving landscape, the practical takeaway is clear: regulatory risk will depend on more than a single Supreme Court headline.
Operators should monitor the Court’s reasoning, assess the laws and regulatory positions in every state where they operate, and prepare for potential enforcement and further litigation. Businesses involved in prediction markets should also consider how a decision focused on sports contracts could influence the treatment of other event-based products.
Linda’s analysis underscores why the details matter. A Supreme Court ruling could reset the debate without resolving it—leaving operators and regulators to navigate a complicated, state-by-state legal landscape.
If you have questions about your organization’s potential exposures, please connect with Linda directly at lgoldstein@cm.law.
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The foregoing content is for informational purposes only and should not be relied upon as legal advice. Federal, state, and local laws can change rapidly and, therefore, this content may become obsolete or outdated. Please consult with an attorney of your choice to ensure you obtain the most current and accurate counsel about your particular situation.
