TD Cowen: In predictive-market legal fight, states retain the upper hand…uncertainty to linger despite CFTC involvement

An analysis says that in the legal dispute surrounding U.S. sports-based predictive markets, states still have the upper hand even after the Commodity Futures Trading Commission (CFTC) stepped in.

According to The Block on the 18th (local time), TD Cowen said in a report that in the tug-of-war between the federal government and state governments over regulatory authority for sports predictive markets, states have a somewhat stronger legal footing.

Jaret Seiberg, managing director at TD Cowen’s Washington Research Group, said, “Because sports betting has historically been regulated by states, that gives states a slight advantage in this legal battle.” He also cited the recent tendency of the U.S. Supreme Court to place weight on historical precedent.

The dispute centers on litigation between the state of Nevada and Crypto.com. Last year, the Nevada Gaming Control Board sought to block sports event contracts offered by Crypto.com, deeming them unlicensed gambling. Crypto.com countered that the products are federally regulated derivatives subject to CFTC oversight, arguing the state had exceeded its authority.

The federal district court ruled in Nevada’s favor, and the case is now pending before the U.S. Court of Appeals for the Ninth Circuit. On the 18th, the CFTC filed a brief with the court backing federal supervisory authority.

In its filing, the CFTC said, “States may not evade the CFTC’s exclusive jurisdiction by recharacterizing swaps traded on a designated contract market (DCM) as illegal gambling,” adding that “the lower court’s ruling is inconsistent with the text and structure of the Commodity Exchange Act (CEA) and its legislative purpose.”

Seiberg forecast that the matter is likely to end up at the Supreme Court. He said, “Proceedings at the Ninth Circuit could run through 2027, and could be delayed further if en banc rehearing is sought,” adding, “Supreme Court arguments may not take place until the fall of 2027, with a decision potentially not coming until early 2028.”

He also said there are political variables. “Even within the Republican Party, there are plenty of figures opposed to sports betting, and they do not want predictive markets to become a means of circumventing states’ anti-gambling policies,” Seiberg said. “It’s hard to assume a Republican-controlled Congress will move aggressively to protect predictive markets.”

TD Cowen said that despite the CFTC’s involvement, legal uncertainty could persist for years and may act as a structural risk across the predictive-markets industry.