In this Sports Betting Operator article, Marc Zwillinger and Ben MacLean analyze the emerging legal battle over sports event contracts offered by designated contract markets (DCMs) like Kalshi, which operate under federal commodity regulations rather than state gaming laws. Federal courts in Nevada and New Jersey have sided with DCMs, ruling that the Commodity Exchange Act preempts state attempts to regulate contracts, despite state regulators’ concerns around essential consumer protections like age verification and responsible gambling measures. While DCMs argue they provide legitimate hedging tools with economic utility, state regulators maintain that sports event contracts are indistinguishable from unlicensed sports betting. The article also examines how the CFTC’s approach to its ‘Special Rule’ against contracts contrary to the public interest has evolved from blocking political event contracts in 2012 to facing legal challenges over election contracts.
