CFTC General Counsel describes prediction market litigation as voluminous

CFTC General Counsel calls prediction market litigation voluminous and fast moving

In a conference room in New York, Tyler Badgley sorted the litigation into four buckets. Designated contract markets suing states. States filing criminal indictments against CFTC-regulated entities. The CFTC itself seeking injunctions. And then everything else — class actions, tribal sovereignty claims, a category that exists because the other three were not enough to contain the disorder.

Badgley is the CFTC's general counsel. He said this at Predict 2026. The word he used was "voluminous."

That word is doing real work. What Badgley was describing is not a regulatory disagreement that will be resolved by a single appellate ruling or a well-drafted settlement agreement. It is a structural collision between two bodies of law — the Commodity Exchange Act's framework for federally regulated derivatives trading and state gambling statutes that predate prediction markets entirely — being litigated simultaneously across multiple jurisdictions, at multiple levels, with no single court positioned to resolve the conflict for all of them.

Rob Schwartz, a former CFTC general counsel who moderated the session, reached back to 1688 and a Dutch merchant named Joseph Penso de la Vega, who described the Amsterdam Beurs as a gambling hell and its traders as skillful gamblers. The same merchant also explained, in the same pages, how derivatives hedge market risk. Schwartz's point was that the tension between those two characterizations is not new. What is new is that sports-related contracts only launched in March of last year, which means the legal infrastructure for resolving that tension has not caught up to the commercial reality.

The Arizona indictment — twenty criminal counts against Kalshi, including unlicensed gambling and illegal election wagering, filed by the state's attorney general — remains on hold after a federal judge issued a temporary restraining order in April. That stay is not a resolution. It is a pause, conditioned on courts or Congress eventually providing one. Neither is moving quickly.

The consensus read of this litigation map treats federal preemption as the likely destination: CFTC jurisdiction eventually holds, the states get carved back, the market expands. I think that read underweights what Badgley's fourth bucket actually contains. Tribal gaming compacts operate under the Indian Gaming Regulatory Act, a statutory framework with its own preemption logic, its own federal-state architecture, and a political constituency that does not lose quietly. Class-action plaintiffs are not constrained by the same preemption arguments that bind state regulators. The "everything else" category is not a holding pen for weak claims — it is where the litigation that does not fit the CFTC's preferred framing will continue regardless of how the core preemption fight resolves.

The legal standard that governs the core question is whether a given contract constitutes a "swap" within the meaning of the Commodity Exchange Act, as amended by Dodd-Frank, or whether it falls outside that definition and into the space state gambling laws are permitted to occupy. The Illinois ruling found sports event contracts are likely swaps. Arizona's criminal case found the opposite. Both findings are preliminary. Neither is binding on the other jurisdiction.