Fluharty dismisses prediction markets as moonshine at Las Vegas panel

Fluharty called prediction markets moonshine at the G2E panel in Las Vegas, and the line got a laugh. It also described the structural problem more precisely than most of the legal briefs have managed.

The story running underneath the casino executives' remarks at G2E is not really about prediction markets. It is about what happens when a federal regulator tries to draw a jurisdictional line after courts have already drawn it somewhere else. The CFTC has now sent two rules to OIRA — one proposed, one interim final — that would place event contracts inside the swap definition while carving casino-style products back out. The agency classified both as not economically significant, which is how you move something through White House review without triggering the full scrutiny that attaches to major rulemakings. The full text is not yet public.

That sequencing is worth sitting with. The interim final rule is the unusual instrument here. Agencies reach for it when they want a regulation to apply while comments are still being collected, which means the CFTC is trying to create legal facts faster than the comment period normally allows. The reason for the speed is visible in the court record: states have prevailed in 38 of 43 rulings on preliminary injunctions, temporary restraining orders, and stays. A swing state supreme court or a hostile Sixth Circuit panel is a more immediate threat to the agency's theory than any notice-and-comment timeline.

The CME Group CEO Terry Duffy's comment at the Innovation Advisory Committee — 2,500 self-certifications from prediction operators, none opposed — tells you what the CFTC's posture has been on the market-access side. The agency has been permissive at the front door while fighting the states at the courthouse. The swap redefinition is an attempt to make that permissiveness durable, to give it statutory architecture instead of leaving it to rest on enforcement discretion alone.

I do not think it lands the way the CFTC intends. The Sixth Circuit found unanimously that Ohio and Tennessee could enforce their sports betting laws against Kalshi, and it did so on grounds that the existing swap framework did not preempt state gambling authority for these contracts. A proposed rule that has not yet completed notice-and-comment cannot retroactively reframe what the court already reviewed. The interim final rule might get there faster, but it will face the same circuits and the same states, now with a stronger record of hostile precedent behind them.

What the casino executives said at G2E is structurally consistent with that read. MGM's position is not squeamishness — Nevada regulators told them directly that entering prediction markets would affect their licensing suitability, and they made a portfolio decision. Caesars is watching the DFS parallel carefully: Tom Reeg is right that the operators who ran in the gray market before PASPA fell had a structural head start. The question is whether the gray market this time ends in legalization or in a Supreme Court ruling that leaves the CFTC's preemption theory in pieces.

With New Jersey's petition to the Supreme Court pending and a Third-Sixth Circuit split already on record, the Court has the jurisdictional conflict it typically requires before granting certiorari. If it takes the case, the CFTC's rulemaking may arrive after the constitutional question is already settled — either legitimizing the agency's position or rendering it academic. The rulemaking and the litigation are running toward the same point from opposite directions, and the timing of OIRA review puts the final rule somewhere in that corridor.

The 2,500 self-certifications with zero oppositions is the detail that has not received enough attention. It means the CFTC has been building a compliance infrastructure for prediction markets on the assumption of federal preemption, at scale, before that preemption has been upheld by any court that has examined the sports contract question squarely. If the Supreme Court rules against the agency, the unwinding problem is not small.