The Commodity Futures Trading Commission (CFTC) has submitted an amicus brief in a U.S. appeals court supporting Kalshi, a prediction market operator, in its legal dispute with Ohio regulators as the agency aims to strengthen federal oversight of prediction markets.

The brief was lodged in the U.S. Court of Appeals for the Sixth Circuit in the case KalshiEx LLC v. Matthew T. Schuler, et al. The CFTC contends that it maintains exclusive jurisdiction over prediction markets via a regulatory framework established by Congress.

This filing is a continuation of the agency’s broader initiative against what it terms “state encroachment” on federally regulated prediction markets, which have gained traction during the 2024 U.S. presidential election cycle.

Ohio officials, among them Matthew Schuler, Executive Director of the Ohio Casino Control Commission, assert that Kalshi’s event contracts related to sports constitute unauthorized sports betting under state law.

In March, Chief Judge Sarah D. Morrison denied Kalshi’s requested preliminary injunction, stating that Congress had not evidently aimed to “preempt state sports gambling statutes.”

CFTC Chairman Michael S. Selig expressed discontent with that ruling in a statement accompanying the brief.

“The federal district court in Ohio failed to recognize the full extent of the Commission’s jurisdiction,” Selig remarked. “We urge the Court of Appeals to rectify this mistake.” He further noted, “The CFTC will not permit aggressive state governments to undermine the agency’s established authority over these markets.”

This conflict underscores the escalating friction between federal regulators and state authorities over whether prediction markets should be governed by federal commodities law or state gambling regulations.

The CFTC has initiated lawsuits against Arizona, Connecticut, Illinois, New York, and Wisconsin concerning attempts to regulate prediction markets. The agency also achieved a preliminary injunction against Arizona’s oversight of CFTC-regulated prediction markets and has issued comparable amicus briefs in the Ninth Circuit and the Supreme Judicial Court of Massachusetts.

At the Financial Industry Regulatory Authority annual conference earlier on Tuesday, Selig articulated the necessity for federal jurisdiction over prediction markets.

“We possess a nationwide framework for our markets, and it’s essential since these markets operate across state boundaries,” Selig stated. “Traders are interacting nationwide, necessitating federal regulatory oversight.”

However, states remain unyielding against the CFTC’s stance. Last month, New York Attorney General Letitia James, alongside 37 other attorneys general, filed an amicus brief supporting Massachusetts’ lawsuit against Kalshi.

James stated, “Prediction markets cannot sidestep state gambling laws that are put in place to safeguard consumers.”

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