CFTC Amicus Brief on Event Contracts: The Boundary Between Swaps and Wagers
De Silva Law Offices, LLC
February 19, 2026
On February 17, 2026, the Commodity Futures Trading Commission took a step it has avoided for over a year. It filed an amicus brief in the Ninth Circuit, entering the litigation over event contracts for the first time as a formal participant. The case is North American Derivatives Exchange, Inc. v. Nevada (Case No. 25-7187), and the brief lands at a moment when roughly fifty lawsuits across the country are testing the question of whether sports event contracts are federally regulated derivatives or state-regulated gambling.
The brief is aggressive. It is also, in one critical respect, deliberately incomplete.
The CFTC argues forcefully that event contracts are swaps under the plain language of the Commodity Exchange Act and that its exclusive jurisdiction preempts state gambling laws as applied to instruments traded on designated contract markets. But buried in the middle of the brief, around page 20, is a concession that may prove more consequential than anything else the Commission wrote. The CFTC states that it need not resolve the outer boundary between swaps and wagers to prevail in this case. In other words, the agency is claiming total jurisdictional authority over these instruments while openly acknowledging that it has not determined where derivatives end and gambling begins.
That strategic choice reveals a great deal about the current regulatory landscape. It also creates a set of implications that market participants, exchanges, and their counsel should be thinking about right now.
The CFTC's Statutory Argument: Plain Language, Full Stop
The brief builds its case on the CEA's definition of "swap" in Section 1a(47). The CFTC invokes two independent statutory prongs. Under subsection (A)(i), event contracts qualify as options based on quantitative measures or financial interests in commodities. Under subsection (A)(ii), they qualify as contracts providing for payments dependent on the occurrence of events with financial, commercial, or economic consequences.
This second prong is where the argument gets interesting. The CFTC contends that sporting events carry genuine economic consequences. The brief points to the regional economic activity generated by major sports, including impacts on hospitality, tourism, and local business revenue. A Super Bowl, for example, generates hundreds of millions of dollars in economic activity for its host city. The argument is not that fans are hedging risk. It is that the underlying events are embedded in the broader economy in ways that satisfy the statutory language.
As we discussed in our prior analysis, Sports Event Contracts in Prediction Markets: Binary Payoffs and the Federal-State Regulatory Boundary, the binary payoff structure of these contracts does not disqualify them from classification as swaps. The CEA's swap definition is deliberately expansive, and Dodd-Frank was designed to bring a broad range of financial instruments within the CFTC's regulatory perimeter. The amicus brief doubles down on that breadth.
The Concession That Changes Everything
Here is what makes this brief different from the typical assertion of agency jurisdiction. The CFTC does not claim to have resolved whether every event contract is a swap, as opposed to a wager that falls outside its regulatory authority. It claims, instead, that it does not need to answer that question in order to win.
This is a carefully calibrated position. The Commission is telling the Ninth Circuit that even if there exists some theoretical category of event contracts that might be pure wagers rather than swaps, the contracts at issue here are not in that category. The CFTC is asserting that the statutory text is clear enough at the core to resolve this dispute without mapping the outer edges. Think of it as a claim of jurisdiction over the heartland of event contracts while leaving the frontier deliberately unmapped.
Why does this matter? For three reasons.
First, it means the CFTC has not actually established a test for distinguishing swaps from wagers. The agency is defending its jurisdiction over event contracts without providing market participants, exchanges, or courts with a principled framework for determining which contracts fall inside the line and which fall outside it. The more than 3,000 event contracts that have been self-certified across eight DCMs all exist in a space where the regulator has now confirmed there is no bright-line rule.
Second, the concession is a litigation strategy, but it also functions as a policy signal. By refusing to draw the line, the CFTC preserves maximum flexibility for future rulemaking and enforcement. Chairman Selig has already announced plans for a new rulemaking on event contracts, and the agency's refusal to resolve the boundary question in this brief likely reflects an intent to address it through rulemaking rather than litigation. As we noted when the CFTC's Innovation Advisory Committee was announced, the Commission is assembling the institutional architecture to define event contract regulation on its own terms. (See our analysis of the CFTC Innovation Advisory Committee and Prediction Markets: Polymarket, Kalshi, and Event Contracts.)
Third,the concession may actually strengthen the CFTC's preemption argument. If the outer boundary remains undefined, then state regulators cannot claim that particular contracts fall on the gambling side of the line, because no authoritative line exists. The CFTC is, in effect, arguing that the question of where swaps end and gambling begins is a federal question that only the CFTC (or Congress) can answer. Until it is answered, state regulators lack the authority to make that determination for themselves.
Field Preemption and the Impartial Access Problem
The preemption analysis in the brief operates on two tracks.
The field preemption argument is sweeping. The CFTC contends that Section 2(a)(1)(A) of the CEA, which grants the Commission "exclusive jurisdiction" over swaps traded on registered exchanges, reflects congressional intent to occupy the entire field of derivatives regulation on DCMs. The brief traces this intent through the legislative history, beginning with the 1974 amendments that created the CFTC and continuing through Dodd-Frank's expansion of the Commission's authority over swaps. The argument is that Congress did not merely intend to supplement state regulation. It intended to displace it entirely as applied to instruments traded on CFTC-registered venues.
The conflict preemption argument is, in some ways, even more potent. Federal regulations require DCMs to provide "impartial access" to all market participants nationwide. Specifically, 17 C.F.R. § 38.151(b) mandates that exchanges provide access to their markets on a fair, equitable, and nondiscriminatory basis. If Nevada can prohibit its residents from trading event contracts on a federally registered exchange, then the exchange cannot comply with the federal impartial access requirement as to those residents. The CFTC argues this creates a textbook impossibility conflict. An exchange cannot simultaneously exclude Nevada residents (as state law demands) and provide impartial access to all participants (as federal law requires).
This conflict preemption point deserves particular attention from compliance officers at DCMs. If the Ninth Circuit accepts it, the implications extend well beyond sports event contracts. Any state law that effectively prevents residents from accessing a federally registered exchange would face the same impossibility argument. The precedent could reshape compliance planning for exchanges listing weather contracts, energy derivatives, economic index contracts, and other instruments that might attract state regulatory attention in the future.
The Savings Clause and What It Does Not Save
Nevada's strongest textual argument has always been the savings clause in Section 2(a)(1)(A) of the CEA, which provides that the CFTC's exclusive jurisdiction does not "supersede or limit the jurisdiction" conferred on any other agency or authority. The CFTC's brief addresses this head-on, arguing that the savings clause preserves states' traditional police powers in areas like fraud and consumer protection but does not authorize states to prohibit the trading of federally regulated derivatives.
The distinction is important. The CFTC is not arguing that states have no role whatsoever. It is arguing that states cannot use gambling laws to ban instruments that federal law classifies as swaps and subjects to federal oversight. A state could still prosecute fraud in connection with event contract trading. It could regulate conduct that is ancillary to the trading itself. What it cannot do, according to the CFTC, is declare that the federal instrument does not exist as a legitimate financial product within its borders.
This reading of the savings clause aligns with the broader federal preemption principle, familiar from areas like banking and telecommunications, that a savings clause preserves complementary state authority but does not override an express grant of exclusive jurisdiction. Whether the Ninth Circuit will adopt this interpretation remains to be seen, but the CFTC has framed it in terms that make the alternative seem untenable. If the savings clause allowed states to prohibit federally regulated swaps, it would effectively nullify the exclusive jurisdiction provision.
The Slippery Slope the CFTC Wants Courts to See
The brief closes with a warning that resonates far beyond sports. If Nevada's position is accepted, the CFTC argues, there is no principled reason why states could not apply the same logic to weather derivatives, energy contracts, election contracts, or economic index futures. Any contract whose underlying event could be characterized as speculative or chance-based could be recharacterized by a state regulator as gambling. The result would be a patchwork of state-by-state prohibitions that would fragment what Congress intended to be a unified national market for derivatives.
This concern is not hypothetical. As we have discussed in the context of federal preemption and state crypto regulation, the tension between federal regulatory schemes and state-level prohibition is already playing out across multiple dimensions of the financial technology sector. The event contracts dispute is simply the sharpest current expression of a recurring structural problem: when federal regulators create a permissive framework and states assert the authority to shut it down, the resulting uncertainty imposes real costs on market participants and threatens the viability of regulated innovation.
The CFTC's brief also underscores a practical reality that is easy to overlook. There are now over 3,000 event contracts self-certified across eight DCMs. These contracts cover sports, weather, economics, politics, and more. The exchanges that list them, the clearinghouses that clear them, and the intermediaries that facilitate access to them have all built their operations on the premise that the CEA provides a comprehensive federal regulatory framework. If that premise is wrong, the consequences extend to every contract and every participant in the ecosystem.
What Comes Next
The amicus brief is a significant development, but it is not the final word. Several factors will shape how this plays out.
The Ninth Circuit's decision in this case will be the most immediate variable. But the Third Circuit is also considering Kalshi's appeal on similar preemption questions, and the Fourth Circuit has the Maryland case before it. A circuit split seems increasingly likely, which would create a plausible path to Supreme Court review. The CFTC's entry as amicus may accelerate that trajectory. Federal appellate courts tend to take agency views seriously, even in a post-Loper Bright world where Chevron deference no longer applies. The CFTC is not asking for deference to its interpretation. It is asking the court to read the statute as it is written and to recognize that Congress said what it meant when it granted exclusive jurisdiction.
Meanwhile, Chairman Selig's promised rulemaking on event contracts could address the boundary question that the amicus brief deliberately left open. If the CFTC promulgates rules defining which event contracts are permissible and which are not, the agency will have done through regulation what it declined to do through litigation. The timing matters. A final rule would carry the force of law and could moot many of the arguments state regulators are currently making in court.
For now, the most important takeaway is the one the CFTC did not state explicitly but made unmistakable in the structure of its argument. The Commission believes it has sole authority to determine whether an event contract is a legitimate swap or an impermissible wager. Until it makes that determination, no one else may make it either. That is a breathtaking claim of regulatory primacy. It is also, given the plain language of the CEA, a defensible one.
At De Silva Law Offices, we advise exchanges, intermediaries, and fintech companies navigating the evolving regulatory framework for event contracts and prediction markets. For more on the federal-state regulatory divide, see our prior analyses on sports event contracts and binary payoffs, the CFTC Innovation Advisory Committee, and federal preemption in state crypto regulation. If you have questions about how the CFTC's amicus brief may affect your operations or compliance planning, please contact us.