The CFTC has been suing states that try to regulate or ban prediction markets, saying it alone has jurisdiction over them. The CEA gives the CFTC exclusive jurisdiction over swaps, defined as “any agreement, contract, or transaction… that provides for any purchase, sale, payment, or delivery… that is dependent on the occurrence, nonoccurrence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or commercial consequence.”

Nelson wrote that sports event contracts offered on Kalshi are sports gambling, regardless of whether Kalshi calls them swaps. Quoting Shakespeare’s Romeo and Juliet—“that which we call a rose by any other name would smell as sweet”—Nelson wrote that “placing sports bets, even when called by another name, is still gambling.”

The broadest reading of the legal definition of swap “might cover the sports event contracts here and thus preempt Nevada law,” but the broad reading proposed by Kalshi conflicts with the larger statutory scheme and has no limiting principle, judges wrote. “Congress has spoken on the issue of gambling in other statutes,” and did not repeal or amend those laws in the Dodd–Frank Act, which gave the CFTC authority over swaps, the ruling said.

Nelson’s ruling was joined by Judge Bridget Bade, while Judge Kenneth Lee wrote a concurring opinion. Lee said he “agree[s] with the majority opinion that the more natural reading of ‘event’ under the statutory definition of a ‘swap’ would not include the outcome of a sporting event.”

“Few people would describe, say, the New York Mets’ latest loss of a game as an ‘event,’” Lee wrote. “Likewise, I do not think the outcome of a typical sports game is ‘associated with a potential financial, economic, or commercial consequence’ as required under the definition of a swap. Going back to the Mets example, perhaps in an uber-technical sense a Mets’ loss could have marginal economic impact as some fans guzzle more beer to drown away their sorrows. But it seems somewhat fanciful to say that the outcome of a single game in a 162-game season is likely ‘associated’ with a ‘financial, economic, or commercial consequence’ that one would expect in a swap contract.”