The NFL Enters the Legal Battle Over Prediction Market Regulation

While most of you are aware of sportsbooks like FanDuel and DraftKings, a different type of platform known as prediction markets is blurring the line between “financial trading” and sports betting. Now, these platforms are at the center of a growing legal battle over who has the authority to regulate them: the states or the federal government.[1]

What is a Prediction Market?
Unlike sportsbooks, which accept wagers on sporting events and are regulated by state gambling laws,[2] prediction markets allow users to buy and sell contracts tied to the outcomes of future events. Rather than betting against the “house,” as you would with traditional sportsbooks, participants swap contracts among themselves with prices determined by market value.[3] That distinction is significant because prediction markets argue that their contracts qualify as federally regulated “swaps,” and are thus not subject to the state gambling laws governing traditional sportsbooks.[4] So, even though both platforms offer contracts or wagers tied to sporting events, prediction markets can operate nationwide under federal law without obtaining state gambling licenses. This raises significant concerns regarding tax implications, consumer protections, and overall sports integrity as prediction markets currently operate without many of the restrictions imposed on traditional sportsbooks.

The Legal Distinction
In Murphy v. National Collegiate Athletic Association, 584 U.S. 453 (2018), the Supreme Court struck down the Professional and Amateur Sports Protection Act (PASPA), holding that Congress could not prohibit states from authorizing sports gambling. The decision allowed individual states to determine whether to legalize and regulate sports betting, and today, 39 of them and the District of Columbia permit some form of sports betting.[5]

Prediction markets, on the other hand, occupy a different and increasingly contested position. Federally registered platforms such as Kalshi and Polymarket argue that their event contracts qualify as “swaps” under the Commodity Exchange Act (CEA) and therefore fall within the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC).[6] This means that while sportsbooks are limited to operating in states where they are legally authorized, prediction markets can offer sports-related contracts nationwide under federal law, regardless of individual state gambling restrictions.

This issue reached the federal courts in KalshiEX, LLC v. Flaherty, 172 F.4th 220 (3d Cir. 2026) after Kalshi challenged New Jersey’s attempt to enforce its gambling laws against the platform. The district court granted Kalshi a preliminary injunction, which the Third Circuit affirmed, finding that Kalshi was likely to succeed on its argument that federal law preempts New Jersey’s gambling regulations. Since then, the Ninth and Sixth Circuits have reached contrary conclusions in cases involving Nevada, Ohio, and Tennessee.[7] New Jersey recently petitioned the U.S. Supreme Court to review the Third Circuit’s decision,[8] and the National Football League (NFL) has filed an amicus brief urging the Court to hear the case,[9] potentially setting the stage for a national resolution.

What’s at Stake?
This legal battle extends far beyond prediction markets, raising questions about federal authority, state sovereignty, and the future of sports betting in the United States. As of today, the Supreme Court has not agreed to hear the case, and Kalshi’s response to New Jersey’s petition is due November 9, 2026.

For Kalshi and the CFTC, a ruling in favor of federal jurisdiction would preserve a uniform national regulatory framework and prevent individual states from imposing conflicting restrictions on prediction markets.[10] Such a ruling could allow prediction markets to continue offering sports-related contracts nationwide without obtaining individual state gambling licenses or complying with state restrictions. CFTC Chairman Michael S. Selig argues that:

“[e]vent 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.”[11]

For the states, that ruling would allow prediction markets to operate outside their gambling laws, possibly undermining state tax revenues and consumer protections. According to the American Gaming Association, sports-related prediction markets have already diverted more than $1.5 billion in potential state tax revenue since the beginning of 2025.[12] These revenues help fund essential public services such as education, law enforcement, and programs for seniors and individuals with disabilities.[13] Consumer protections are also at stake, as a recent study found that only 34% of sports event contract traders reported seeing responsible gaming messages or tools on their platforms, compared to 78% of traditional sportsbook users.[14]

The NFL has raised similar concerns, arguing that the CFTC has not adopted safeguards comparable to those imposed by state gaming regulators, including restrictions on certain wagers and a minimum betting age of 21.[15] These concerns are particularly significant given the scale of trading activity on NFL games. According to the NFL, contracts tied to the league accounted for more than half of all prediction market trading volume on the opening Sunday of the 2026 NFL season, totaling $1.8 billion of the $3.3 billion traded.[16]

With that being said, the NFL recently renewed its multiyear partnerships with DraftKings and FanDuel and added Fanatics as an official sports betting partner.[17] These agreements grant the sportsbooks direct access to NFL trademarks, official statistics, and promotional opportunities. Although the NFL has emphasized concerns over betting safeguards, the league also has a substantial financial interest in preventing prediction markets from curtailing state gambling laws. Prediction markets compete with the NFL’s official sportsbook partners for customers seeking to wager on NFL games, potentially diverting business away from sportsbooks while also attracting customers in states where sports betting remains prohibited. As prediction markets continue to offer contracts tied to NFL games without paying for official league partnerships, their growing presence could diminish the commercial value of the league’s existing sportsbook agreements.[18]

Where the Odds Stand
Ultimately, a line must be drawn between sports betting and financial trading. States should be permitted to regulate sports-related bets or contracts, while the federal government maintains jurisdiction over other qualifying event contracts. Such an approach would respect the states’ traditional authority over gambling without undermining the federal regulatory framework governing prediction markets. As the Sixth Circuit recently explained in KalshiEX LLC v. Schuler,

“[state gambling] laws impose no restrictions on the designation or operation of contract markets as such. Instead, they regulate sports betting.”[19]

This distinction demonstrates that state regulation of sports gambling and federal oversight of prediction markets need not be mutually exclusive.

Notably, the CEA expressly recognizes event contracts involving “gaming” as potentially contrary to the public interest, authorizing the CFTC to prohibit their trading upon such a determination.[20] This provision suggests that Congress recognized the need to treat gaming-related contracts differently from other event contracts, even within the federal regulatory framework. Whether the Supreme Court ultimately agrees to hear the case remains uncertain, but its decision could have significant implications for the future of prediction markets.

[1] My classmate Lily Busler previously examined the legal dispute between prediction markets and state gambling regulators. See https://ublawsportsforum.com/2026/09/15/the-legal-fight-over-sports-gambling-and-prediction-markets/.

[2] See Murphy v. National Collegiate Athletic Association, 584 U.S. 453 (2018).

[3] https://www.cftc.gov/LearnandProtect/PredictionMarkets.

[4] Supra note 1.

[5] https://www.americangaming.org/research/state-of-play-map/.

[6] 7 U.S.C. § 2(a)(1)(A). “The Commission shall have exclusive jurisdiction, except to the extent otherwise provided in the Wall Street Transparency and Accountability Act of 2010 (including an amendment made by that Act) and subparagraphs (C), (D), and (I) of this paragraph and subsections (c) and (f), with respect to accounts, agreements (including any transaction which is of the character of, or is commonly known to the trade as, an “option”, “privilege”, “indemnity”, “bid”, “offer”, “put”, “call”, “advance guaranty”, or “decline guaranty”), and transactions involving swaps or contracts of sale of a commodity for future delivery (including significant price discovery contracts), traded or executed on a contract market designated pursuant to section 7 of this title or a swap execution facility pursuant to section 7b–3 of this title or any other board of trade, exchange, or market, and transactions subject to regulation by the Commission pursuant to section 23 of this title.”

[7] See KalshiEX, LLC v. Assad, No. 25-7516, 2026 WL 2543846 (9th Cir. Aug. 28, 2026); KalshiEX LLC v. Schuler, No. 26-3196, 2026 WL 2884087 (6th Cir. Sept. 25, 2026).

[8] https://www.njoag.gov/wp-content/uploads/2026/09/2026-0902_26-_PetitionForWritOfCertiorari.pdf.

[9] https://www.espn.com/nfl/story/_/id/50132618/nfl-supreme-court-kalshi-prediction-markets-regulation.

[10] KalshiEX, LLC v. Flaherty, 172 F.4th 220 (3d Cir. 2026); “At first, the law did not preempt state regulation in the area. But that resulted in a patchwork of state regulations, so Congress amended the Act in 1974 and created the CFTC to oversee trading on federally designated ‘contract market[s].’”

[11] https://www.cftc.gov/PressRoom/PressReleases/9183-26.

[12] https://www.americangaming.org/resources/commercial-gaming-revenue-tracker/.

[13] https://www.njoag.gov/wp-content/uploads/2026/09/2026-0902_26-_PetitionForWritOfCertiorari.pdf.

[14] https://www.americangaming.org/resources/sports-event-contracts-selling-sports-betting-as-investing/.

[15] https://www.supremecourt.gov/DocketPDF/26/26-299/428826/20261008053543625_NFL%20Amicus%20Brief.pdf.

[16] Id.

[17] https://www.nfl.com/news/nfl-draftkings-fanduel-fanatics-sports-betting-partners.

[18] https://www.sportsbusinessjournal.com/Articles/2026/04/03/sportsbooks-push-to-protect-sponsorship-rights-as-prediction-market-deals-grow/.

[19] https://www.opn.ca6.uscourts.gov/opinions.pdf/26a0272p-06.pdf.

[20] https://www.law.cornell.edu/uscode/text/7/7a-2. “(C) Special rule for review and approval of event contracts and swaps contracts. (i) Event contracts: In connection with the listing of agreements, contracts, transactions, or swaps in excluded commodities that are based upon the occurrence, extent of an occurrence, or contingency (other than a change in the price, rate, value, or levels of a commodity described in section 1a(2)(i) [2] of this title), by a designated contract market or swap execution facility, the Commission may determine that such agreements, contracts, or transactions are contrary to the public interest if the agreements, contracts, or transactions involve—(I) activity that is unlawful under any Federal or State law; (II) terrorism; (III) assassination; (IV) war; (V) gaming; or (VI) other similar activity determined by the Commission, by rule or regulation, to be contrary to the public interest.”