Prediction markets may appear to have the legal upper hand today, but one of the country's foremost gaming law scholars believes the fight over sports event contracts is ultimately headed toward a different conclusion.
- Gaming law scholar I. Nelson Rose predicts the Supreme Court will ultimately rule Congress never intended the Commodity Exchange Act to authorize sports event contracts, preserving state authority over gambling regulation.
- Prediction market operators have won early court victories, but ongoing litigation with states including Nevada could determine whether federally regulated exchanges can continue offering sports contracts nationwide.
- Rose argues the core legal issue is not whether event contracts resemble gambling, but whether Congress intended the Commodity Exchange Act to override decades of state control over gaming policy.
Speaking at the National Council of Legislators from Gaming States' summer meeting in San Diego, professor I. Nelson Rose predicted the Supreme Court will eventually determine Congress never intended to authorize federally regulated event contracts on sporting events, restoring states' authority over what he characterized as gambling regulation.
The long-time gambling legal professor told attendees the federal Commodity Exchange Act (CEA), which prediction markets have cited as the legal authorization for their event contracts, was not intended to allow trades on sporting events.
"I actually think ... when it gets to the full court in a full brief, (the justices) will say no, this isn't what the CEA means," Rose said, arguing the issue ultimately turns less on whether prediction markets constitute gambling than on Congress' intent and longstanding principles of states' rights.
Prediction market legal background
The remarks come as prediction market operator Kalshi continues to battle state gaming regulators across the country over its sports event contracts, with federal courts weighing whether the Commodity Futures Trading Commission's authority preempts state gambling laws. The litigation has emerged as one of the most consequential legal disputes facing the regulated gaming industry, pitting states that license and tax sports betting against federally regulated exchanges that argue their contracts fall exclusively under commodities law.
Kalshi has secured several early procedural victories, including temporary restraining orders and preliminary injunctions that have allowed the company to continue offering sports event contracts in multiple jurisdictions while broader legal questions remain unresolved. States including Nevada, New Jersey, Maryland, and others have challenged the contracts, arguing they amount to unauthorized sports wagering conducted outside state regulatory frameworks.
Rose suggested those early courtroom victories should not be mistaken for a final resolution.
"Appeals to the Supreme Court take years," he said, noting that emergency rulings on temporary restraining orders are distinct from a full review on the merits. While emergency applications may preserve the status quo, he predicted the justices eventually will confront whether Congress intended the CEA to permit contracts on sporting events.
Several leading prediction market operators, including Kalshi and Coinbase, scored a significant legal victory when the Third Circuit Court of Appeals ruled in their favor to continue offering sports event contracts. These and other top operators are awaiting a decision led by Nevada regulators heard in the Ninth Circuit that legal analysts believe may rule against them.
Kalshi is also facing successful state-led injunction challenges from Nevada and Michigan, where local courts have mandated the platform cease operations as legal challenges continue.
Rose lays out case
Rose is widely regarded as one of the pioneers of gaming law as an academic discipline. A professor emeritus at Whittier College, he developed the nation's first law school course devoted to gaming law and has spent decades advising governments, regulators, and industry stakeholders on gambling policy.
Speaking to a conference of state lawmakers and gaming stakeholders last week, Rose traced the history of gambling regulation back centuries, arguing that commodity markets developed for commercial hedging rather than wagering on sporting outcomes.
He pointed to the Commodity Exchange Act of 1936, which exempted federally regulated commodity exchanges from state anti-gambling laws while allowing the CFTC to determine whether contracts serve the public interest. Although today's prediction market operators contend sports event contracts qualify as commodities, Rose argued Congress never envisioned the statute as a vehicle to legalize nationwide sports betting through federal commodities regulation.
Rose argued the central legal issue extends beyond whether sports event contracts resemble traditional sports betting. Instead, he said, the dispute ultimately asks whether Congress intended the CEA to displace the states' longstanding authority to determine what forms of gambling may legally operate within their borders.
"The only simple legal question was what was the intent of Congress when Congress passed the Commodity Exchange Act," Rose said. "Did they mean to allow a contract, for example, on who wins the coin flip at the Super Bowl, or who wins a football game? And the answer is easy; no, of course they didn't."
Rose noted Congress has historically deferred gambling policy to the states through laws including the Indian Gaming Regulatory Act and the Unlawful Internet Gambling Enforcement Act. He also pointed to the US Supreme Court's 2018 decision striking down the federal sports wagering ban, arguing the ruling reinforced that states – not the federal government – determine whether to authorize sports wagering.
That principle, he said, could ultimately prove decisive as litigation moves beyond preliminary injunctions and temporary restraining orders into appeals on the merits.
Rose acknowledged that if courts ultimately determine federally regulated event contracts are lawful commodities, states would be largely preempted from prohibiting them, with taxation remaining among the few regulatory tools available. Conversely, if states prevail, prediction market operators could face significant legal consequences under state gambling laws, he argued.
Continued suspense
For now, Rose expects the legal uncertainty to persist.
Rather than reaching the Supreme Court through a traditional appeal in the near term, he said many disputes are likely to continue through emergency applications tied to temporary court orders, delaying a definitive ruling on the broader legal questions. In the meantime, the outcome will largely depend on how individual state and federal courts rule as litigation continues across the country.
Despite that uncertainty, Rose said he believes the legal framework governing gambling and commodities ultimately favors the states.
"My prediction is eventually, eventually, they'll say, of course, gambling is gambling, gambling is not a commodity," Rose said. "When it gets to the full court in a full brief, (the justices) will say no, this isn't what the Commodity Exchange Act means."
