Forty-four state attorneys general challenge CFTC sports prediction markets rule proposal

Forty-four state attorneys general are urging the Commodity Futures Trading Commission (CFTC) to abandon and revise its proposal for regulation of sports prediction markets, citing concerns over the proposal's legality and potential usurpation of state authority. In comments submitted to the agency, the attorneys general argue that the proposed rule would expand federal regulatory control over a traditionally state-regulated area, and that the Commodity Exchange Act does not grant the CFTC the necessary jurisdiction to oversee sports betting through event contracts.

Ohio Attorney General Andy Wilson, who leads the coalition of state attorneys general, asserts that the proposal exceeds the CFTC's statutory powers, conflicts with the Constitution, and would result in arbitrary and capricious outcomes. The attorneys general maintain that sports bets should not be treated as financial derivatives, as they serve no hedging, price-discovery, or other financial purposes consistent with the original intent of the Commodity Exchange Act.

They also object to the proposal's assertion that state gambling laws would be preempted by the national derivatives regulation, and argue that the rule disregards extensive state consumer protections. The dispute stems from months of escalating conflicts between state and federal authorities, with New York Attorney General Letitia James previously warning that prediction markets lack the necessary consumer protections for licensed sportsbooks and could expose operators to civil and criminal liability.