Alabama Attorney General Steve Marshall is challenging a federal proposal that he and 43 other state attorneys general say would improperly shield sports prediction markets from Alabama law.
Marshall joined the multistate coalition in submitting comments Monday to the Commodity Futures Trading Commission over its proposed rules for event contracts offered through prediction markets.
The CFTC proposal would create a framework for determining whether contracts involving gaming, unlawful conduct and several other categories are contrary to the public interest. The agency has pointed to the growing number of contracts tied to sporting events as one reason clearer rules are needed.
The attorneys general argue the proposal exceeds the commission’s authority under the Commodity Exchange Act and threatens states’ traditional power to regulate gambling.
“States have long regulated gambling, including sports bets. The federal government has not,” the coalition wrote.
Alabama has not authorized sports betting, but prediction-market platforms offer contracts tied to game outcomes under federal commodities regulation. Those products can allow users to put money on which team will win, point spreads, total scores and individual player performances.
The coalition argues there is no meaningful distinction for consumers between those contracts and wagers placed through a traditional sportsbook.
According to the letter, sports contracts do not perform the hedging, price-discovery or risk-management functions associated with financial derivatives regulated by the CFTC. The attorneys general contend that calling the wagers event contracts does not transform them into swaps, futures or other financial products.
The states also argue the proposal could interfere with gambling laws enacted by individual states by allowing federally regulated exchanges to offer sports contracts regardless of whether the state has legalized sports betting.
The CFTC has said its proposed framework would protect the integrity of federally regulated markets while allowing legitimate innovation to continue. The agency has not finalized the rule.
Marshall and the coalition urged the commission to rewrite the proposal and clarify that sports betting and other gambling contracts remain subject to state law.
“The CFTC should start afresh with its rulemaking,” the attorneys general wrote.
Sawyer Knowles is a state and political reporter for Yellowhammer News. You may contact him at [email protected].
