The National Football League told the U.S. Supreme Court on Thursday that sports contracts on prediction markets are gambling, not swaps, and asked the justices to take up the question before another season passes.
The league filed an amicus brief supporting the New Jersey officials who petitioned the Court, in Flaherty v. KalshiEX, to review a Third Circuit ruling for Kalshi.
“Billions of dollars will be bet on NFL games through prediction markets each season, and any delay from the Court will result in increasing consumer harm and risk to game integrity,” the NFL wrote in its brief.
Get Unchained’s crypto news in your inbox with the free Unchained Daily newsletter.
The Swap Question
The Third Circuit held that Kalshi’s sports contracts are swaps under Dodd-Frank, which puts them under the CFTC’s exclusive jurisdiction. The Sixth and Ninth Circuits reached the opposite conclusion.
The NFL sides with those two courts. It argues in the brief that Dodd-Frank’s definition of a swap covers instruments used to hedge existing risk, not “wagers that create risk primarily for gambling purposes.”
The league also cites the size of the market. On the first Sunday of this NFL season, $1.8 billion of the $3.3 billion traded across prediction markets was tied to the NFL, the brief says.
Safeguards the League Wants
The NFL says it has urged the CFTC and operators like Kalshi to ban contracts that one person can easily manipulate, such as whether a kicker will miss a field goal, and contracts on injuries and officiating. It says they have so far declined.
It also objects that the CFTC has so far allowed 18-year-olds to trade sports contracts, while states generally set the minimum age at 21. It says the CFTC and exchanges have so far “stuck to a more laissez-faire approach.”
Kalshi has partnered with integrity firm IC360 to monitor for prohibited bettors, but the NFL says it is unclear how that system could be effective without the league’s involvement.
Kalshi Responds
Kalshi said in a statement that its “top priority is the integrity of its markets” and that it works with every other major U.S. sports league and integrity partner, including Major League Baseball and the NHL. The company said the CFTC “is actively policing sports-related markets,” that the agency’s ongoing rulemaking “addresses many of the NFL’s supposed concerns,” and that its rules sit atop “the same comprehensive system of federal enforcement that protects trillions of dollars of transactions in US markets.”
Gensler and Dodd Also File
Former CFTC Chairman Gary Gensler and former Sen. Chris Dodd, who sponsored Dodd-Frank, filed briefs Thursday as well. “Congress did not transfer jurisdiction over sports betting from the States to the CFTC,” Gensler wrote in his brief.
Dodd wrote in his brief that Congress “did not set out to authorize nationwide sports betting through derivatives markets or displace decades of state and tribal primacy over gaming regulation.”
Kalshi’s response to the petition is due Nov. 9.
Related Listen: The Chopping Block: The CLARITY Act, Hyperliquid vs CME, and the Prediction Market Supreme Court Showdown
