Not Swaps, and Not Preempted Even If They Were
U.S. District Judge Vernon D. Oliver’s ruling rests on a threshold point rather than preemption: for the CFTC’s exclusive jurisdiction to attach, a contract must be a swap traded on a designated contract market. Oliver held it is the judiciary’s role, not the agency’s, to decide what counts as a swap, rejecting Kalshi’s argument that any such challenge must be brought against the CFTC itself.
On the statute, Oliver read “the occurrence, nonoccurrence, or the extent of the occurrence of an event” to concern whether an event happens and to what degree, not its outcomes. He adopted the reasoning of the District of Nevada in a case brought by a Crypto.com-owned exchange – which found that dictionaries treat “event” as meaning “outcome” only in an archaic sense. A boxing match can occur, not occur, or run three rounds; who wins is an outcome of the event, not a separate event. Oliver expressly declined to decide whether contracts on whether a game reaches overtime or a series reaches a seventh game would fare differently, since neither was in the record.
His second ground was the requirement that the event be associated with a potential financial, economic, or commercial consequence. That connection must be embedded in the event itself, Oliver held, not created by endorsement contracts, bonus provisions, side wagers, or other downstream arrangements made by independent actors. A sporting event has consequences built in through ticket sales, broadcast rights, and advertising; who wins it does not. He also noted Kalshi’s own concession in earlier litigation before the D.C. Circuit that contracts on games are unlikely to serve any commercial or hedging interest.
Between 80% and 90% of the contracts listed on Kalshi’s exchange were sports-event contracts, responsible for a similar portion of company revenue. The CFTC has not subjected a single one to review under the special rule, let alone prohibited any. Kalshi was valued at roughly $11 billion at February’s hearing and has about 24,000 Connecticut users.
Oliver reached preemption anyway and rejected it on both theories. The special rule at § 7a-2(c)(5)(C), which lets the CFTC bar contracts involving gaming or activity unlawful under state law, reflects an intent to preserve state authority rather than displace it. Federal impartial-access rules bar discriminatory access criteria; they do not require a DCM to offer contracts nationwide. And he was unwilling to read Dodd-Frank as handing exclusive authority over sports betting to a financial regulator with no history in the field, noting that Congress has never appropriated funds to the CFTC for that purpose.
