CFTC sends two prediction market rulemakings to White House

Tarek Mansour said it in federal court, not long ago, and the transcript exists: sports betting should not be regulated as a derivatives product. Bill Miller quoted it back to a room full of gaming executives at The Venetian this week, and the crowd understood exactly what he was doing. The man who built Kalshi had drawn the line himself, and then crossed it.

The Commodity Futures Trading Commission has now sent two rulemakings to the White House Office of Information and Regulatory Affairs for review, each aimed at clarifying which event contracts qualify as swaps under the Commodity Exchange Act. What OIRA does with them, and on what timeline, is not on the public record. But the act of filing them there — before any court in the Third Circuit or Ninth Circuit split has issued a final ruling — tells you something about how the Commission reads its own position.

The CFTC's jurisdictional claim rests on a reading of 7 U.S.C. § 1a(47), which defines "swap" to include contracts whose value is contingent on the occurrence of an event. The Commission has long maintained that sports-event contracts fall within that definition and are therefore subject to federal preemption under the Supremacy Clause. State gaming regulators — in Nevada, Tennessee, and elsewhere — have taken the opposite position: that these are wagers on sporting outcomes and that the Professional and Amateur Sports Protection Act's successor framework, read against state police power, leaves room for state enforcement. Both readings have survived at least one court's scrutiny. That is why the Supreme Court took the case.

The conventional read of OIRA review is that it delays. Rulemakings that go in sometimes come out changed, sometimes come out stalled, occasionally come out stronger. What the CFTC appears to be doing is something the Commission has done before in contested jurisdictional territory: building the administrative record before the courts finish building theirs. A final rule in place, even a contested one, changes the deference calculus under whatever remains of Chevron's skeleton. Courts reviewing agency action against a completed rulemaking ask a different question than courts reviewing agency action against enforcement alone.

The gaming industry's argument — and Miller made it plainly at G2E — is that the CFTC is exercising jurisdiction it was never meant to have over products that state legislators, tribal compacts, and decades of licensing infrastructure were built to govern. That argument has political weight. It has some legal weight. What it does not have is a clear answer to the preemption question that the Supremacy Clause poses when a federal agency with statutory authority acts first.

The standard a reviewing court applies is whether the agency acted within the scope of its enabling statute and whether Congress left room for concurrent state regulation in this domain. Given the Commodity Exchange Act's breadth, and given that the CFTC's position has already survived at least one preliminary challenge, that standard is harder to satisfy than Miller's framing at The Venetian suggested.