Fourth Circuit ruling on event contracts could reshape state authority

Jason Robins stood at a podium in New York on Thursday and said, with evident satisfaction, that DraftKings had reached third place in prediction market volume. The crowd took this as a sign that the industry was maturing. I took it as a sign that the industry has built significant commercial infrastructure on a legal foundation that remains genuinely unresolved — and that the Fourth Circuit ruling, still pending, is more consequential than most of the commentary around it acknowledges.

Here is where the circuit map sits. The Third Circuit found that sports event contracts qualify as swaps under the Commodity Exchange Act, blocking New Jersey's attempt to regulate them as gambling. The Ninth Circuit went the other way in the Nevada case, concluding the contracts are likely not swaps. The Sixth Circuit threaded a narrower position: contracts may be swaps, but state gaming law might not be preempted even if they are. The Fourth Circuit has not yet ruled. Massachusetts is still working through its own version of the question.

That Sixth Circuit position deserves more attention than it has received. It is the circuit split within the circuit split. A finding that contracts are swaps but that state authority survives anyway is the outcome the states need — it lets them regulate without having to win the definitional argument outright. If the Fourth Circuit lands in the same place, and the Supreme Court takes the New Jersey case after Kalshi's brief lands on November 9, there will be at least two circuit courts holding that federal designation does not automatically preempt state gaming law. That is a harder position for Kalshi to argue past than a simple swap or not-swap disagreement.

Robins' framing at the Next Predict Summit was that DraftKings has positioned itself to win either way — operating through the CFTC in states without sports betting licenses, and staying out of federally regulated prediction markets where they hold gaming licenses. That is a coherent hedge. It also means DraftKings has implicitly priced in a meaningful probability that state authority survives, something the more aggressive operators have not.

The industry's legal argument — that the Commodity Exchange Act gives the CFTC exclusive jurisdiction, full stop — is clean and has won one major circuit. But I have sat through enough regulatory fights to recognize what happens when a federal preemption claim collides with an organized coalition of state regulators who believe Congress never intended to strip them of authority over gambling. The political economy tends to favor the states over time, even when the initial legal wins favor the federal claimant.

My read is that the market is underweighting the Sixth Circuit theory — that federal designation and state authority can coexist — as the eventual resolution. It is not the cleanest legal outcome, but it is the one that gives everyone something and requires the least congressional intervention. The operators who have bet on clean federal preemption have built their compliance posture around a binary they may not get.

The Fourth Circuit ruling, whenever it arrives, closes one of the last remaining gaps in this map. If it aligns with the Sixth Circuit, the Supreme Court will be looking at a majority position that does not fully vindicate either side — and that is the scenario the prediction market industry's current valuations have not priced.