CFTC Tells Prediction Markets to Ditch Sportsbook-Style Odds Amid State Gambling Lawsuits

The Commodity Futures Trading Commission sent letters to prediction market platforms it regulates telling them to stop displaying trades using American-style gambling odds, according to a letter viewed by Bloomberg and reported August 7.

The format in question is the plus/minus system every sports bettor already knows. A -200 or +150 tells you how much you win or need to risk. It's how DraftKings and FanDuel present a bet. It's not typically how a derivatives exchange prices a contract.

Prediction markets like Kalshi normally price contracts between $0 and $1, reflecting the implied probability of an event happening. The CFTC's letter reminds regulated entities that they still have to follow U.S. derivatives law, and that using "deceptive" practices to list, solicit or advertise these products is prohibited, according to the letter cited by Bloomberg.

In other words, if your product looks like a sportsbook and quotes odds like a sportsbook, don't be surprised when people start asking if it's regulated like one.

The bigger fight this sits inside

This warning didn't come out of nowhere. The CFTC is currently in a legal dispute with a growing list of states over who actually gets to police sports-event contracts.

New York Attorney General Letitia James sued Kalshi on July 31, seeking at least $36 billion in damages and penalties, according to crypto.news. The lawsuit alleges Kalshi is running an unlicensed gambling operation by letting New York residents trade contracts tied to sporting events. Kalshi denies that characterization, arguing its status as a CFTC-registered exchange puts it outside state gambling oversight entirely.

That's the core legal question nobody has definitively answered yet: does federal registration under the Commodity Exchange Act preempt state gambling law, or doesn't it?

Kalshi's position is straightforward and not unreasonable on its face. It's a federally regulated derivatives exchange, registered with a federal agency, trading contracts on outcomes the same way commodities exchanges trade contracts on wheat prices or interest rates. If the CFTC says it's a legal derivative, why should 50 different state gaming commissions get a veto?

But state regulators have a real argument too. Washington state secured a preliminary injunction against Kalshi in July, with a court finding that federal derivatives law didn't stop the state from enforcing its own gambling restrictions, according to crypto.news. A Wisconsin federal court separately rejected the CFTC's attempt to block states from applying gambling laws to these platforms. And in Utah, a federal court ruled the state can enforce its anti-gambling laws against prediction markets, which is why Kalshi has now filed an emergency motion for an injunction pending appeal.

Gaming law expert Daniel Wallach, cited by crypto.news, said Kalshi is seeking expedited relief because it's worried Utah Attorney General Derek Brown could pursue civil or criminal charges while that appeal is still pending. For a company operating in dozens of states simultaneously, that represents a significant risk.

And it's not just a handful of blue-state or red-state outliers. Attorneys general from 44 states recently asked the CFTC to withdraw and rewrite its proposed prediction market rules entirely, arguing that sports betting has always been state-regulated turf and should stay that way, according to crypto.news. When 44 states agree on something, that's a substantial position.

Why the odds format actually matters here

This isn't a cosmetic issue. If a platform prices a contract as "$0.65" reflecting a 65% implied probability, that reads like a financial instrument. If it displays the same bet as "-185," that reads like a parlay slip. The CFTC's letter is effectively telling these firms: stop borrowing sportsbook branding to make your product more appealing to sports bettors, because that branding is exactly what's landing you in state gambling lawsuits.

It's a defensive move by the CFTC as much as anything. The agency is trying to hold onto exclusive jurisdiction over these contracts under the Commodity Exchange Act. Letting regulated platforms dress themselves up as sportsbooks undercuts that argument in every courtroom where it's currently being litigated.

None of the state lawsuits have produced a final verdict. No criminal charges have been filed against Kalshi or its executives. The Utah appeal is still pending, and the underlying jurisdictional question—whether federal derivatives law trumps state gambling law for these contracts—remains unresolved across at least four states. The next concrete marker to watch is how the federal appeals court rules on Kalshi's emergency motion in the Utah case, since that outcome could set the tone for how aggressively other states move against the platforms.