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The US regulatory fight over prediction markets is becoming more precise. A new Commodity Futures Trading Commission proposal would define terms such as “gaming” and “involve,” while courts and state regulators continue to test whether sports event contracts should be treated like federally regulated derivatives or state-regulated wagers.
That matters because the business models are similar on the surface, but the source article says they work differently underneath.
What the CFTC says separates exchanges from sportsbooks
According to the report, a sportsbook posts odds and takes the other side of a customer’s bet. An event-contract exchange, by contrast, uses an order book to match buyers and sellers.
That distinction has become central to the debate. CFTC Chairman Michael S. Selig said on 20 August that the statute does not define “gaming” or “involve,” leaving firms “at risk of rejection based upon arbitrary whims or political biases.”
The article also cites a comment letter from ProphetX CEO Dean Sisun, who argued that a two-sided, peer-to-peer exchange under federal oversight “is not simply another way to package the state sportsbook model.” ProphetX LLC has been listed by the CFTC as a designated contract market since 11 June 2026.
The CFTC’s March notice said prediction-market venues offering swaps or futures to the general public must register as designated contract markets. Its June proposal would go further by defining key terms, setting public-interest factors, and treating player injury and discrete-action contracts as likely contrary to the public interest.
Courts and states are still challenging the model
Even as the CFTC moves on rulemaking, state regulators are pressing gambling-law arguments. Nevada regulators and courts are testing whether federal derivatives law preempts state gaming law for sports event contracts.
On 28 August, the Ninth Circuit held that Kalshi had not shown the Commodity Exchange Act likely preempted Nevada’s gaming regulations for sports event contracts. Then, on 2 September, New Jersey’s attorney general asked the US Supreme Court to review whether sports wagers on prediction markets can avoid state sports-gambling laws.
Operators are moving quickly as products converge
The market is developing while the legal lines are still being drawn. Novig launched nationally on 4 August after the CFTC granted designated contract market status to its Ludlow Exchange LLC subsidiary on 16 June. Novig said its first week produced more than $125 million of notional volume, with parlays accounting for roughly a third of activity.
DraftKings also filed event-contract templates with the CFTC in May for DKeX, presenting another potential route outside the traditional state-by-state sportsbook licensing model.
For players, the immediate takeaway is not that the categories are settled, but that regulators are still deciding where the boundary lies. The next signals to watch are the final shape of the CFTC’s rules and how higher courts handle the clash between federal derivatives oversight and state gambling law.
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Source: As reported by Tanya Chepkova.
