A coalition of U.S. lawmakers from both parties is seeking clarification from the Commodity Futures Trading Commission (CFTC), accusing the agency of permitting event contracts akin to unregulated sports wagering across state borders.
In a letter addressed to acting CFTC Chair Caroline Pham on Monday, six senators from five different states expressed their concerns regarding platforms like Kalshi and Robinhood that provide “Yes” or “No” contracts on various sports events, including NFL, college football, and Major League Baseball.
The legislators contend that these products are effectively classified as sports betting, which is under the jurisdiction of state laws and tribal authorities, rather than federal regulation.
“The CFTC is specifically banned from allowing event contracts that entail gaming, violate federal or state laws, or contradict public interest,” the letter emphasizes.
“In spite of this restriction, the CFTC has permitted sportsbook gaming to mislabel themselves as ‘event contracts’ under CFTC oversight. For instance, certain companies assert they can facilitate legal sports betting in all 50 states. This behavior – coupled with the CFTC’s inaction – opposes both the text and the purpose of the law.”
The senators cautioned the CFTC against “circumventing its statutory duties by failing to enforce the restrictions established by Congress.” Such inaction not only undermines state and tribal regulatory powers but also risks unwanted federal intervention in gaming legislation, which the U.S. Supreme Court has confirmed is a matter for state governance.
Signatories of the letter include Senators Catherine Cortez Masto (D-Nevada), John Curtis (R-Utah), Ruben Gallego (D-Arizona), Elissa Slotkin (D-Michigan), Alex Padilla (D-California), and Adam Schiff (D-California). The states represented illustrate a diverse regulatory landscape: Nevada, Arizona, and Michigan allow regulated sports wagering; California restricts it to tribal gaming and has enhanced enforcement against illegal operators; and Utah enforces a complete ban on gambling.
In their correspondence, the senators posed 11 questions to the CFTC, requesting written answers by October 30. These inquiries address how the commission distinguishes between sports betting and event contracts, whether prediction markets adhere to integrity and consumer protection standards, and if they are subject to the Federal Wire Act.
Kalshi, one of the mentioned firms, has claimed to be a federally regulated entity under the CFTC and has initiated lawsuits against state regulators to continue providing its services nationwide. The senators argue this status allows such platforms to bypass essential state safety measures, such as licensing, age limits, anti-money laundering controls, and consumer protection warnings related to addiction.
“The ongoing presence of unlawfully available sports event contracts in all 50 states highlights the necessity for the CFTC to uphold the regulations mandated by Congress,” the senators declared.
“Furthermore, by asserting to be federally regulated by the CFTC, issuers of sports event contracts can evade a multitude of state laws, including licensing mandates and background checks, minimum age requirements, federal anti-money laundering statutes, and consumer safeguards like addiction warnings and integrity monitoring. Such stringent standards are obligatory for state-licensed operators, which the CFTC lacks the authority or capacity to replicate.”
While this letter raises congressional oversight of the CFTC’s regulatory functions, the commission has yet to directly address the legality of contracts related to sports. Recently, the CFTC held a collaborative roundtable with the Securities and Exchange Commission concerning derivative markets; however, the topic of sports betting contracts was notably absent from the agenda.
On the same day the letter was sent, the CFTC released a separate advisory to market participants regarding preparations for potential disruptions due to the current U.S. government shutdown. The notice reminded futures commission merchants, introducing brokers, clearing organizations, and other entities of their regulatory obligations but did not introduce any new requirements.
The advisory, issued by the CFTC’s Market Participants Division, Division of Clearing and Risk, and Division of Market Oversight, was characterized as “a reminder to be ready for all foreseeable circumstances that may arise from facilitating trading and clearing of specific contract markets for customers, other market players, and clearing members.”