It has been a big week of anti-prediction markets mobilization in court.
After the Commodity Futures Trading Commission (CFTC) last week published a proposed rulebook for event contracts that took a broadly permissive stance on sports trading, dozens of state attorneys general, tribal organizations, and even an ex-CFTC chairman filed various amicus briefs in pre-existing court cases.
Nevada, Utah AGs lead charge
In the U.S. Court of Appeals for the Sixth Circuit, where Kalshi and the state of Ohio are facing off, 39 states plus D.C. filed late last week to support Ohio in its fight against sports prediction markets.
Kalshi sued the Ohio Casino Control Commission and Ohio AG Dave Yost last October to try to stymie what it perceived as a plan from the officials to shut down the company in the Buckeye State. A U.S. District Court Judge denied the firm’s request for a preliminary injunction in March and the case is now in the Sixth Circuit.
A group of 40 states, led by Nevada AG Aaron Ford and Utah AG Derek Brown, filed an amicus brief on June 11. In the document, they contend that Kalshi and the CFTC’s fundamental argument that federal laws preempt state gaming laws when it comes to sports contracts rests on an “unrealistic premise: that, when responding to the 2008 financial crisis, Congress quietly chose to make sweeping changes to this country’s gambling laws.”
The group of AGs called on the appeals court to uphold the lower court’s ruling and verify that “Congress did not sneak sports-gambling preemption into the Dodd-Frank Act.”
Separately, 30 Indian tribes and 11 tribal associations, including the Indian Gaming Association, also filed an amicus brief in the Sixth Circuit related to Ohio. The tribal entities wrote that not only does the idea of the CFTC regulating sports betting through prediction markets “undermine decades of federal law” but it also poses an “existential” threat to tribal economy and sovereignty.
Ex-CFTC chief Gensler rejects commission’s arguments
The federal preemption argument made by prediction market platforms and the CFTC also garnered pushback in the Sixth Circuit from a former head of the commission.
Ex-CFTC and Securities and Exchange Commission (SEC) Chairman Gary Gensler filed his own amicus brief in which he dismissed any notion that Congress intended to give the CFTC power to regulate gaming at a federal level.
“Kalshi contends that, by encompassing some event contracts within the statutory definition of swap, Congress purposefully made the CFTC a nationwide sports betting regulator and denied states their traditional police power to regulate gaming, including sports betting,” Gensler wrote. “The answer — from someone who was there — is that Congress did nothing of the sort …
“Nowhere in the Executive Branch’s list of priorities, in Amicus’s 54 appearances before Congress, in any statement of a member of Congress, or in the text of Dodd-Frank was there any indication Congress sought to revise sports betting regulation.”
Sixth Circuit a key prediction markets battleground
The CFTC filed its own submission in the Sixth Circuit in support of Kalshi, continuing its actively pro-prediction markets stance in courts.
The Sixth Circuit is an interesting battleground, given that two courts that fall within its remit — Ohio and Tennessee — came to conflicting rulings. Weeks before Kalshi was denied a temporary injunction in Ohio, it was granted one against Tennessee authorities in February.
A combined oral arguments hearing for the cases is scheduled for July 30. The CFTC will not be there.
Tribal coalition intervenes in New York
Meanwhile, the Ohio prediction markets case is not the only one in which tribes have intervened in recent days.
On Monday, a coalition filed an amicus brief in the CFTC’s lawsuit against New York state authorities. The tribal interests group co-signing that brief includes:
- IGA
- National Congress of American Indians
- Several state-specific associations, including the California Nations Indian Gaming Association
- A total of 30 federally recognized tribes, including the Seminole Tribe
“In New York in particular, the CFTC’s theory would undermine the Tribal-State Gaming Compacts between the New York Tribes and the State, which have been approved by the United States and carefully balance both tribal and state interests over the regulation of tribal gaming in New York, and allow Prediction Markets to intrude on other New York Tribes’ Indian lands to conduct gaming contrary to those Tribes’ regulatory interests in the activity that occurs on their lands,” wrote the tribes.
