39 state gaming regulators back NFL petition as Supreme Court waits

The brief landed on a Friday. Thirty-nine state gaming regulators and the District of Columbia, signing alongside the NFL, urging the Supreme Court to take up Flaherty v. KalshEX. That is not a coalition that assembles itself. Someone spent months on the phone.

The Commodity Futures Trading Commission had spent those same months building in the opposite direction. Chairman Michael Selig's two rulemakings, sent to the White House regulatory office in late September and now formally published, do two things simultaneously: they pull event contracts — sports, politics, weather, cultural outcomes — inside the swap definition under the Commodity Exchange Act, and they push casino-style wagers out. Sportsbook bets are not derivatives, Selig said. Prediction contracts are. The line is drawn.

The architecture of this looks elegant until you ask who enforces it. The CFTC has the rule. It does not yet have the court. The Third Circuit and Ninth Circuit have read the same statute and reached different conclusions about whether event contracts qualify as federally regulated swaps. That split is precisely why New Jersey petitioned the Supreme Court, and precisely why the NFL filed in support. A federal rule that says the CFTC has exclusive jurisdiction does not resolve a circuit split — only nine justices can do that, and four seats were recently filled by nominees who have said very little about derivatives law.

The consensus read, in the days since the briefs landed, is that the CFTC's rulemaking strengthens Kalshi's position: lock in the federal definition before the Court acts, make the question moot by the time oral argument is scheduled. That reading is understandable and probably wrong. A rulemaking is not a judgment. The 39 attorneys general who filed with the gaming regulators are not filing because they expect to lose on the merits — they are filing because they have watched federal agencies use the rulemaking process to pre-empt state authority before, and they know that the way to stop it is to get a court to say the agency overreached. Loper Bright gave them the tool. Chevron deference is gone. Selig's statement that event contracts are "squarely within" the CFTC's remit now has to survive without the deference that once made such statements nearly dispositive.

There is a version of this where the Supreme Court declines to hear the case, the interim rule stands, and Kalshi's federal exchange model becomes the operating template. In a previous position, watching regulatory strategy from the inside, the pattern that preceded that outcome looked different from this. Thirty-nine states do not file amicus briefs on long shots. They file when they have been told, by someone whose opinion they trust, that the Court is paying attention.

The NBA and the NFL are now publicly on opposite sides of the federal-versus-state question. The NBA wants national consistency. The NFL wants state oversight. Both leagues have data rights claims that would be resolved differently depending on which answer prevails. That divergence does not reflect a disagreement about sports integrity. It reflects a disagreement about which regulatory architecture produces more leverage for the league doing the asking.