Recent developments have significantly altered the regulatory environment for sports betting and prediction markets, accompanied by new enforcement actions and legislative updates over the weekend.
Kalshi faced another setback in its ongoing legal disputes with Ohio and Tennessee, while Brazil unexpectedly announced the dismantling of its regulated online betting market just under two years after its inception.
In other news, the CFTC indicated that new rules for sports-event contracts might be implemented within the next two months. Additionally, Florida has intensified its crackdown on sweepstakes casinos, and a comprehensive gambling bill proposed in Pennsylvania aims to introduce major reforms to sports betting, iGaming, and fantasy contests.
The Big Story: Sixth Circuit Rules Against Kalshi
The Sixth Circuit Court ruled that Kalshi’s sports-event contracts do not qualify as swaps under federal commodities law. This decision consolidates conflicting rulings from lower courts; a Tennessee court had previously granted Kalshi a preliminary injunction against state officials, while an Ohio judge had denied one.
The Sixth Circuit upheld the Ohio ruling and nullified the Tennessee injunction, stating, “We hold that Kalshi’s sports-event contracts do not constitute swaps as defined in the CEA and thus do not fall within the scope of the CFTC’s exclusive jurisdiction.”
This ruling aligns the Sixth Circuit with the Ninth Circuit, which has similarly ruled that sports event contracts are not classified as swaps in two separate cases. However, the Sixth Circuit diverged from the Ninth on a crucial aspect, rejecting the notion that the CEA differentiates between an event and its outcome. The court noted, “It would be reasonable to describe the Giants winning the Super Bowl as both an occurrence and an outcome.”
Ultimately, the court determined that sporting events lack the intrinsic connection to financial, economic, or commercial consequences as required under the CEA. Furthermore, even if the contracts were considered swaps, the CEA would not preempt state gambling laws, leading the court to conclude, “Conflict preemption does not block the States’ gaming laws.”
This ruling leaves Kalshi with losses in both the Sixth and Ninth circuits, although the Third Circuit had previously sided with the company in New Jersey.
Brazil Moves to Ban Online Betting
In a significant move, Brazilian President Luiz Inácio Lula da Silva has enacted a provisional measure to prohibit all sports betting and online casinos. This measure took effect immediately but requires Congressional approval within 120 days to remain valid.
Bettors are required to withdraw their available funds by October 5, with deposits already halted. Existing licenses will expire after a 30-day transition period. Lula cited concerns regarding household debt and public health as reasons for the ban, which has garnered support from approximately 75% of the Brazilian population according to recent polls.
This decision comes just a week before Brazil's presidential election on October 4, where Lula is campaigning for reelection against Senator Flávio Bolsonaro, who has publicly criticized the ban as politically motivated.
The ban could pose a substantial financial challenge for operators, as Brazil has quickly emerged as one of the largest betting markets globally since the regulated market's launch in 2025. Entain has issued a statement indicating that this decision could significantly impact its net gaming revenue.
CFTC Anticipates New Event Contract Regulations
The CFTC has announced that it expects its updated event-contract regulations to be finalized within the next two months. This timeline was disclosed in a recent statement.