Tribal gaming compacts face federal preemption with no clear path

In August, the Nevada Gaming Control Board told Kalshi to leave. The Ninth Circuit had found that federal commodities law does not, in fact, prevent states from enforcing their gambling statutes against prediction market operators — and Nevada moved on that finding within weeks. That sequence matters now, because the CFTC has since sent two rulemakings to the White House for review that would, if finalized, establish precisely the federal preemption the Ninth Circuit said did not exist.

The first measure, RIN 3038-AF82, is a proposed rule that would amend the regulatory definition of a "swap" under the Commodity Exchange Act to explicitly cover event contracts. The second, RIN 3038-AF81, is an interim final rule that would carve casino-style gambling products out of that same definition. The CFTC has classified both as not economically significant. Neither text is public.

The classification of the second measure as an interim final rule is the more telling choice. Agencies reach for that instrument when they want a regulation operative during the comment period rather than after it concludes. The CFTC is not waiting for the Supreme Court to resolve the circuit split that New Jersey's attorney general has asked it to take up. It is attempting to write into the Code of Federal Regulations the preemption argument it has been making in court, before any court has ratified it.

The problem is that the rulemaking sequence and the litigation sequence are now running in parallel, and they will not necessarily arrive at the same place. A swap definition that covers event contracts gives the CFTC the textual hook for exclusive jurisdiction. It does not, by itself, bind a court that has already found the Commodity Exchange Act's preemption language insufficient. Statutory interpretation moves in one direction; regulatory definitions move in another. They intersect only if a reviewing court treats the new definition as entitled to deference — and the current appellate posture, with the Ninth Circuit having ruled against preemption and the Third Circuit having ruled for it, gives no clear signal on that question.

The tribes are the party this rulemaking was not designed to consider. Tribal gaming compacts are state instruments, negotiated under the Indian Gaming Regulatory Act and approved by the Secretary of the Interior. If the CFTC's swap definition succeeds in displacing state gambling authority over event contracts, the compact framework that governs tribal exclusivity in states like California and Connecticut has no federal analog to fall back on. IGRA's jurisdictional structure assumes that states retain the authority to regulate gambling that the compact system allocates. Strip that assumption and the compact right becomes a right against a regulator who no longer has jurisdiction to honor it.