Event Contracts face CFTC preemption claim amid pushback

What to Know:

• CFTC claims exclusive jurisdiction over event contracts under the CEA, preempting states.
• Selig withdraws broad bans, pursues rulemaking, defends authority against gambling-law challenges.

The Commodity Futures Trading Commission, led by Chair Michael S. Selig, is asserting exclusive jurisdiction over event contracts under the Commodity Exchange Act. The agency signaled it will push back when state measures conflict with federal oversight of these listed derivatives.

According to Paul, Weiss, Selig directed staff to withdraw prior proposals that would have broadly banned sports- and politics-based event contracts and to move toward formal rulemaking. The firm notes that he also plans to defend the CFTC’s reading of its exclusive jurisdiction, including in litigation where states seek to regulate event contracts as gambling.

Event contracts are derivatives tied to measurable outcomes, such as election results or economic releases, listed by CFTC-regulated markets. The preemption question is whether the CEA displaces state gambling laws when such contracts trade on federally supervised venues.

Why it matters: withdrawn bans, new rulemaking, strengthened stance against states

The withdrawal of prior bans resets the policy baseline and opens a rulemaking path to define which event contracts may be listed and how. A rules-based framework could clarify consumer-protection, market-integrity, and listing standards while distinguishing financial hedging from wagering.

Regulatory Oversight reports that litigation like Kalshi v. New Jersey centers on whether a CFTC-regulated market’s event contracts are preempted from state gambling laws. The outcome may influence if platforms can operate nationally under the CEA or must comply state by state.

As reported by Sports Business Journal, the American Gaming Association has warned that self-certified sports-event contracts could function as de facto nationwide sports betting without state-licensed safeguards. That critique underscores tensions between financial-market supervision and state gaming frameworks.

“ We will no longer sit idly by while overzealous states undermine federal oversight of event contracts,” said Michael S. Selig, Chair of the CFTC. The statement frames preemption as a defense of federal market regulation rather than a bid to expand gambling.

Any new CFTC rules will go through notice-and-comment and could be refined in light of court decisions. Until then, regulated venues, state regulators, and gaming stakeholders face overlapping mandates and legal uncertainty.

How federal preemption could affect Kalshi, state laws, and tribal compacts

If courts affirm broad preemption, CFTC-regulated venues like Kalshi could gain greater legal certainty to list permissible event contracts nationally. If not, state-by-state restrictions and licensing obligations could continue to shape market access and product scope.

According to SBC Americas, the Indian Gaming Association and allied tribal councils have urged the CFTC to deem sports event contracts unlawful for listing, clearing, or trading. Their position reflects concerns about sovereignty, compact exclusivity, and displacement of established regulatory and revenue systems.

SCCG Management notes that leaders such as James Siva of the California Nations Indian Gaming Association have called for stricter federal oversight of prediction markets. The worry is that event contracts resembling sports betting could erode tribal exclusivity and responsible-gaming safeguards if misclassified.

At the time of this writing, based on data from NasdaqGS, Coinbase Global (COIN) last closed around $164.32 on February 13 and traded near $163.61 in an overnight session. The broader discussion highlights how digital-asset and market-structure developments remain volatile alongside evolving derivatives oversight.