Most amicus briefs in sports prediction-market case urge Supreme Court to side with states

Most of the amicus briefs filed last week in the Supreme Court fight over sports prediction markets argue the contracts are gambling products that states, not the CFTC, should regulate, CoinDesk reported.

Filers include former Senator Chris Dodd, former CFTC and SEC chair Gary Gensler, the National Football League, 39 states and the District of Columbia, and 145 tribal nations, according to CoinDesk. The briefs urge the Court to take up the question of whether sports-based prediction market contracts are swaps.

Two federal appeals courts have ruled that prediction markets touching sports are gambling products subject to state regulation. The Third Circuit, in a 2-1 panel decision, held the CFTC has jurisdiction over swaps and prediction markets covering sports.

Dodd's brief leans on the 2010 law carrying his name. Dodd-Frank was not intended to give the CFTC authority to usurp state governments and their ability to regulate gambling, the filing says, per CoinDesk's account. It rejects the Third Circuit's reasoning, drawing a distinction between derivatives as financial instruments and sports wagers.

"Parlays that chain together multiple wagers — often on point spreads or player performances in different games, in different cities, in different sports — do not facilitate hedging or price discovery," the brief states. Nor, it adds, are such contracts "associated with" the type of "potential financial, economic, or commercial consequences" the Commodity Exchange Act requires to qualify as swaps.

The filing also disputes the CFTC's position that it holds "exclusive jurisdiction" over these products, arguing the CEA's grant of exclusive jurisdiction is not an express preemption provision covering every contract listed on a designated contract market.

On Friday, the CFTC published two proposals on the products, one of which CoinDesk says is now in effect. The two tracks press the same question: whether a listed event contract is a swap under the Commodity Exchange Act. A Supreme Court ruling on that language would set the boundary that the CFTC's rulemaking and the state gambling regimes both operate inside. As this publication has argued, with the Clarity Act dead at 49-50 in the Senate, market-structure definitions have moved to agencies and the courts rather than Congress.