The Oklahoma Bar Journal May 2026

rulemaking aimed at further specifying what types of event contracts fall within the “gaming” prohibition, including a proposed determination that political con tests are gaming. 18 On Feb. 4, 2026, the commission formally withdrew that proposal and, the same day, announced the withdrawal of staff letter No. 25-36, a 2025 staff advisory concerning sports-related event contracts. 19 Less than two weeks later, the commission filed an amicus brief in the 9th Circuit, arguing that event contracts traded on CFTC-regulated markets fall within the agency’s exclusive jurisdiction and that state gambling regulation is preempted as applied to those markets. 20 The immediate result is continued uncertainty: The proposed categorical rule is gone, while the commission is now press ing a broad federal jurisdiction position in ongoing litigation. Part II ends where many prac titioners will likely end up: wait ing on the courts. The cases have moved quickly, but they have not produced a single, reliable answer. Litigation Snapshot: Political Contracts and Sports Contracts Event contracts on political outcomes – in particular, the 2024 federal election season – are where the modern conflict first became concrete. In September 2023, the CFTC disapproved KalshiEX LLC’s (now Kalshi) congressio nal control contracts (contracts on which political party would have a majority). Kalshi sued. In September 2024, the U.S. District Court for the District of Columbia vacated the disapproval order PART III: TAX CHARACTERIZATION AND FEDERALISM

products can reach the market quickly. That timing helps explain why the disputes so often arrive as emergency injunction fights: States move quickly to stop what they view as unlicensed gambling, and exchanges respond that federal law controls. 15

betting or other forms of quasi- gambling. From the regulator’s perspective, these products are analyzed through the Commodity Exchange Act (CEA) and CFTC rules governing futures, options, swaps and related derivatives. 12

What a Prediction Market Is (and What the CFTC Has To Do With Them)

The CEA’s ‘Special Rule’ and the CFTC’s Rulemaking (and Withdrawal)

In casual discussion, “prediction market” can describe (at least) two different things. First are CFTC regulated entities – designated con tract markets (DCMs) with related clearing infrastructure – that may be colloquially known as predic tion markets. Second are platforms that have operated without such registration (often offshore), some times offering event-based binary options to U.S. users; these, too, are often called prediction markets. 13 Despite the inclusiveness of the term “prediction market,” the distinction matters. A DCM can list products through a stat utory self-certification process, subject to CFTC review and enforcement, and it can credibly assert that the CEA supplies a federal regulatory home for the contract. Unregistered platforms do not share these characteristics; the CFTC has used enforcement actions to police U.S.-accessible event-based products offered out side the exchange framework. 14 Self-certification is also why legal disputes over event contracts move fast. A DCM may either seek commission approval of a new contract or submit a written self-certification that the con tract complies with the CEA and CFTC regulations. Because the commission only needs to receive a self-certified submission one business day before listing, these

A quick look at current offerings can make event contracts seem lim ited only by the platforms’ imag ination. Kalshi – among the most visible CFTC-regulated prediction markets – offers markets across politics, sports, culture, crypto and other current events. 16 There are ostensibly federal limits to these offerings, however, as the CEA contains a special rule for event contracts. In broad strokes, the statute authorizes the CFTC to review and prohibit certain event contracts that impli cate specified categories (including “gaming”) if they are contrary to the public interest. The CFTC has implemented the special rule by regulation (17 C.F.R. §40.11), but the boundary between “per missible event derivative” and “impermissible gaming contract” remains ambiguous. 17 For example, a trader can take a position on whether the Oklahoma City Thunder will win a particular game. Within the federal exchange framework, that transaction is pre sented as trading a listed derivative contract rather than placing a tra ditional sportsbook wager. Many state regulators disagree with that framing, which is precisely why the federalism dispute matters. In an effort to provide greater certainty, in May 2024, the CFTC issued a notice of proposed

Statements or opinions expressed in the Oklahoma Bar Journal are those of the authors and do not necessarily reflect those of the Oklahoma Bar Association, its officers, Board of Governors, Board of Editors or staff.

MAY 2026 | 37

THE OKLAHOMA BAR JOURNAL