Richard B. Levin, Bobby Wenner, Jorge Castiblanco, and Cristofer Kelman have authored a chapter in Global Leading Insights – Fintech 2026 – “Back to the futures: event contracts, gaming, and who governs tomorrow.” In Back to the Future, small actions in the past sent Marty McFly into radically different versions of 1985, each defined by subtle changes in who controls the future and on what terms. The law of prediction markets has taken a similar turn. Minor shifts in how regulators and courts define “gaming”, “swaps”, and the scope of preemption now threaten to send event contracts down divergent regulatory paths – toward a regime in which they are regulated as derivatives, as state‑regulated gambling, or something in between.
Prediction markets have moved in a short period from academic curiosities and niche experiments to a federally supervised industry at the center of a fast‑moving jurisdictional conflict. In the wake of the Kalshi litigation, designated contract markets (“DCMs”) regulated by the U.S. Commodity Futures Trading Commission (the “CFTC”) now list contracts on elections, sports outcomes, and macroeconomic indicators under the Commodity Exchange Act. The platforms describe their products as event‑based swaps. The fight over prediction markets has become not only a dispute over the meaning of “gaming”, but a dispute over institutional competence. Courts, states, and the CFTC are asking whether event contracts may be listed at all, whether states may still treat them as unlawful wagering, and what surveillance and governance obligations a federally regulated venue must satisfy before such contracts can trade at scale.
The chapter focuses on: (i) the evolution of the product from the Iowa Electronic Markets and the definition of “swaps” under the Dodd‑Frank Wall Street Reform and Consumer Protection Act of 2010 to event‑based swaps listed on CFTC‑regulated DCMs; (ii) the two statutory provisions at the center of the current debate – Section 5c(c)(5)(C), the event‑contract special rule and Section 12(e), the provision addressing federal‑state interaction in this area; (iii) the recent federal and state litigation, including KalshiEX LLC v. CFTC, NADEX v. Nevada, and Massachusetts v. Kalshi; and (iv) the CFTC’s 2026 guidance and rulemaking that present a potential path forwardfor event contracts under a cooperative federalism model.
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