Full Court Press

For good measure, the company also added disclaimers to its website that were honest and accurate (an excerpt is further below). Most every company in this situation takes a different approach. They go out and unleash a full market and deal with any legal problems later. They claim they don’t need regulation, let alone proactively reaching out to the regulators. NSEI had self-imposed investment limits on the ASM platform, reached out to the SEC and asked for guidance.

As they say, no good deed goes unpunished. But first, a Christmas Story.

Scut Farkus

Zack Ward is no stranger to the camera. He played Scut Farkus, the iconic red-headed bully in A Christmas Story as a child actor. Every Christmas, networks run the movie on a 24-hour cycle, and Zack–already popular–gets a fresh boost in visibility.

Chris understood that star power matters. Ace knew Zack from Hollywood, and he got involved. Chris signed an agreement with a Hollywood public relations agency, and they got to work. First came some interviews and newspapers. Then the big prize.

Squawk Box.

This was prime time TV. If you are involved with financial innovation like we were, you need to get up there. The company’s goal was to make sports an asset class, and we felt we had the goods to prove it.

Zack is extremely smart and not shy in front of the camera. But financial innovation requires prep, so I and the rest of the team helped him get ready for the big moment.

On December 11, 2017, the cameras rolled:

Perhaps not Zack’s best performance, but he did quite well. And it did bring in some traders to the website. I don’t have the official count, but I recall the number being near 2,000. We went in with 5,700 active traders if memory serves right (unfortunately Zack fumbled this number stating it as 57 and garnering funny looks from Melissa Lee, one of the hosts), so another couple thousand was meaningful.

Unfortunately, with all that attention came another massive development: An SEC lawsuit.

The SEC Lawsuit

First, it was a call from the SEC. Chris told me that they requested that Chris remove the disclaimer ASM was using on its website. This is, in pertinent part, the copy that I believe was posted at the time:

NSEI has applied to the Division of Trading and Markets of the U.S. Securities and Exchange Commission (“SEC” or “Commission”) to not recommend enforcement action to the Commission under Section 15(a) of the Securities Exchange Act of 1934 (“Securities Exchange Act”) in connection with the proposed sports-related financial instruments offered by the New Sports Economy Institute (“NSEI” or “we”).
Neither NSEI, nor Crystal World Holdings, Inc. is registered as a broker/dealer with the Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA) or any other federal or state securities regulator. At the present time, NSEI HAS NOT filed a registration statement (or a prospectus) with the SEC for any securities offered on the ASM platform. Investment products listed on the ASM platform are non-registered securities; meaning, they have not been registered with any state or federal securities registration authority.

I didn’t know what to make of the SEC’s request. To me, it was really important that the traders were not being misled. The first question we almost always get from league partners, potential investors, etc., is: Is this regulated? That is understandable. Leagues want to know whether the product went through the rigorous process of establishing regulatory certainty. Same for potential investors. The company intended to go through the process, but it hadn’t yet, so it did what it was supposed to do: Be honest about it.

You probably know this but disclosure is at the heart of everything the SEC does. The Great Depression happened, and about half of the newly issued securities were deemed worthless by Congress because of significant gaps in disclosures. The twin acts of 1933 and 1934 arose to fill those gaps, and when FDR instructed Congress, he honed on this core philosophy:

Of course, the Federal Government cannot and should not take any action which might be construed as approving or guaranteeing that newly issued securities are sound in the sense that their value will be maintained or that the properties which they represent will earn profit.
There is, however, an obligation upon us to insist that every issue of new securities to be sold in interstate commerce shall be accompanied by full publicity and information, and that no essentially important element attending the issue shall be concealed from the buying public. (emphasis added).

Courts understood this too. The Supreme Court opined (in 1963):

[W]hat is required is “a picture not simply of the show window, but of the entire store . . . not simply truth in the statements volunteered, but disclosure.

The no-action relief request, the disclosure on the website…. From Chris’s perspective–and it’s difficult to disagree with him on this one–he was showing the entire store.

Not that it always helped the company. In at least one instance, it prevented it from securing capital. The NSEI donations did bring in some funds, no question. But both NSEI and CWH constantly tried other ways, too. NSEI applied for multiple grants. There was a section 506 raise at one point. And there were crowdfunding attempts–WeFunder and StartEngine. The latter didn’t come through primarily because the platform took issue with the disclosure, more specifically the fact that the company may be offering unregistered securities. Their thinking was exactly backwards: The company tried to explain that the main reason for the fundraise was to hire regulatory counsel (as it had a decade prior with the first iteration of the ASM, and later the SRI) and to seek regulatory certainty. The disclaimer was not: “Here, get some unregistered securities.” It was: “We think these might constitute securities offerings, and we wanted to be honest about it. Until we figure it out, we want to make sure you are not misled.”

The daily fantasy sports industry did the exact opposite a couple years prior, and crypto would do the exact opposite a few years later–behaviors I never agreed with. But can you blame them? The laws say we want you to be honest. That is literally what FDR instructed Congress. That’s what SCOTUS said. But the market is not designed to reward that behavior. In our case at least, it did the exact opposite and I don’t think we were alone. In hindsight, we could have been better off if we had: i) Said nothing, or worse ii) Openly denied that what we were offering could be securities even though that’s what we believed. Something is fundamentally wrong with that picture.

In any event, the SEC did not like the disclosure, and Chris complied. Then came the Wells Notice–the dreaded document that signals litigation is about to commence.

The company responded to the Wells Notice. If there was any glimmer of hope that the SEC would backtrack (I did some research on this at the time and remember that roughly 20 percent or so of cases stop short of litigation), that hope was gone when the complaint dropped on August 19, 2019.

A Long Cycle

Litigation is very time consuming, it is expensive, and oftentimes a lot of collateral damage. For large companies, it may simply be a line item as a cost of doing business. For small ones though, it’s closer to a death knell. Just one example: The company was trying hard to catch up with its financial books and had even hired an audit firm. Once they heard about the SEC complaint that was filed, there was no effort to understand the company’s side of the story or an effort to deliver what they were contractually delivered to do and they backed out of their contract without a refund.

I was appalled. I worked for one of the largest accounting firms in the country at the time. It didn’t occur to me that service was optional for a paying client. PwC took the high road on these matters–we provided the service even if the client was behind on payments. Litigation is a fact of life. Accounting firms don’t just drop an engagement, much less after being paid in full, simply because there is unresolved litigation. That just doesn’t happen.

The whole thing felt so unfair. The company had been dinged twice. It paid but never received the service, and because it didn’t receive the service, it appeared as though it was shirking its compliance obligations–not a great look when you are in court with the SEC because of a compliance problem.

One way or another, counsel was needed to resolve the dispute. I remember speaking to one prospective attorney, and their proposed strategy was: “Throw Chris under the bus.” I told them I would be on the side of truth, and wasn’t interested in character assassination of any kind. Lay out the facts, including my internal disagreements with Chris? Of course. Purposefully tell a one-sided story just to win? I won’t do that, ever. That’s not me. I also saw how Leon did that and how that story ended. My loyalty is to the truth and to the truth only, and I am not interested in spinning because the outcome might be favorable to me.

The search wasn’t getting anywhere, but thankfully Jim Falvey came to the rescue. He was USFE’s General Counsel when the SRI, our other piece of financial innovation, got stopped at the one-yard line. He knew Chris, and Jim and I had kept in touch. He was a natural choice. But then, mid-litigation, he started having some health issues and realized he wouldn’t be able to keep up with the demands of the litigation. He suggested that we work with the lawyer in D.C. that had acted as local counsel previously, whereas Jim was on board as pro hac vice (since he was from Chicago), Cheryl Stein.

Working With the Wrong Attorney

Cheryl was not versed in securities law at all, but her rate was very reasonable and the company was stuck between a rock and hard place. Chad Deihl, who has stepped in as the new CEO in 2023, and I began paying her out of pocket, and we got underway.

There were several lengthy delays involved with this litigation, including the COVID pandemic and the January 6th insurrection (the criminal cases were in the same D.C. district and got bumped ahead of all the civil cases), and others Cheryl-related. To be fair, she was also going through some health issues. But it is also true that she wasn’t equipped for the job. Let’s just say she wasn’t the most organized lawyer. Time management was a real issue. I also felt she was rude, she yelled at Chad and I during an attorney-client phone call. Quite simply, I was appalled. I worked for PwC for 19 years and never once had I yelled at a client when there was a disagreement. Once you’ve delivered professional services at the highest level, your assumption is that every service provider operates the same way, but that’s simply not true. If the company had more access to cash, she would have been replaced early on. The idiom, “You get what you pay for” was in play here.

The even more profound issue here was that her mentality was also to throw Chris under the bus. Cheryl is a criminal defense lawyer by trade and it was her natural inclination, it’s just that she had never said I want to throw him under the bus. By the time I realized that’s what she had in mind all along, it was too late.

The Signs Were There

I should take some of the blame here because the signs were there. Cheryl never said that she was going to turn this into a character assassination. But I should have read the situation better.

Again, disclosure. When the other prospective attorney suggested how they planned to argue the case, at least that was honest. You could react to that and say, sorry, I’m not interested in going down that path. With Cheryl, it was never quite clear how she was going to argue it. I actually drafted most of the brief for her, and she would end up discarding most of it.

It started with bifurcation. When she suggested that we bifurcate the case because Chris’s interests and the Company’s could diverge, it was one of those things that sounded reasonable at first, in fact Chris agreed with it. What was expressed to us was that a lawyer shouldn’t be representing both the individual and the corporations together (especially when the individual is no longer acting for the companies) as it is often forbidden due to conflicts of interest; ultimately Chris needed to find his own lawyer. I’m not sure whether this was the right approach. Did I have my disagreements with Chris? I absolutely did. To this day, I still believe Chris took an unnecessary risk. But the way the disgorgement law works, the better strategy still would have been the way Jim was planning to litigate the case, as a unified front.

That may sound counterintuitive, so let me give you a couple of examples to drive the point home. Chris never had an employment agreement with the company. Of course, that’s not ideal, but if the paperwork is put aside and one looks at the actual economics of the transaction, he did pay himself. Chad and I painstakingly constructed all these records, and when all was said and done, our math told us he paid himself a little over $50,000 a year. Barely over minimum wage at the time and certainly underpaid as a resident in the Los Angeles area.

For someone who had the dual role of being a CEO of a financial innovation company and Managing Director of a non-profit, the compensation certainly was not unreasonable by any stretch of the imagination. So was that compensation a legitimate business expense? Of course it was. The question is not whether or not I agreed with Chris on everything. The question was whether the rate was a market rate. I was not aware of anybody else who was willing to do the job, much less for minimum wage, so that’s that.

Why does it matter that it was a genuine business expense? Because, generally speaking, legitimate business expenses get deducted from the math per SCOTUS guidance in Liu. Cheryl saw it differently. In her mind, conceding that quarter million dollars was smart, and a good look for the company because it showed the company’s willingness to budge. Worse, we literally had no more than 30 seconds to discuss her decision; by the time she had laid out her position, the brief was already late and needed to be submitted. In the heat of the moment, and panicking because we were late, we didn’t have an opportunity to make a healthy assessment and ended up taking a position that we (at least I) didn’t believe in.

Cheryl fumbled the non-profit issue too. I took a lot of time to piece together the facts, the audio with Jill Lublin, everything. I peppered it with some case law references, too. The question was the same. Were the re-donations a legitimate business expense? In my mind, they absolutely were. My draft said:

Charitable contributions by NSEI were effectively an insurance policy for NSEI, which paid ‘premiums’ to a non-profit of choice to avoid a low-probability, but catastrophic outcome of a potential impeachment of NSEI as a non-profit. The SEC’s position amounts to arguing that because an insurance premium does not improve a bottom line, it is not a legitimate business expense. For these reasons, the SEC’s argument should be rejected by the Court.

Cheryl ignored it. That was incompetence at best. When a CEO asks for guidance from an expert in the field, and implements the advice to manage a potential risk and uses funds for that purpose, that sounds to me like a legitimate expense. It is even more puzzling how an attorney would not see that there is, at a minimum, a plausible argument here.

A Story of Incentives

It’s an incentive story. It’s always an incentive story.

As an economist, I learned long ago that everything boils down to incentives. Back when I was a teacher–many moons ago–I taught from Greg Mankiw’s Principles of Economics. Among its core lessons, the fourth principle stood out as particularly powerful: “People respond to incentives.”

The motive is so powerful that author Steven Landsburg, in The Armchair Economist: Economics and Everyday Life, went even further and said:

Most of economics can be summarized in four words: “People respond to incentives.” The rest is commentary.

If we look at the behaviors of the parties through that lens, a picture emerges.

Let’s start with Cheryl. In her mind, she was doing the best thing for her client (the bifurcation early on, and then the strategy she followed). Many attorneys convince themselves that the client winning in court comes before everything else (that’s what they stake their business on–wins). Sometimes, they take it too far. Chad and I debated this at some point– if the client was suggesting a strategy and the attorney believed there was a better one, the attorney feels empowered to go down that path.

That level of paternalism never sat right with me. Tax consulting doesn’t really work that way. If I disagreed with my client on a position, I would voice my concern and make a recommendation, but the ultimate decision was the client’s. Why would it be the advisor’s? It’s their business, they don’t have to follow the recommendations if they didn’t think it was in their best interest. In any event, objectives should be defined by the client. Getting a true, complete narrative out was more important to me than just winning a material, yet isolated court case.

That’s my ethics line, one I am not willing to cross. But it was even worse. In this case, the complete, true narrative also happened to be helpful to the case. Ethics is enough reason, nothing else needs to be considered. But being ethical also happened to the best legal strategy for the companies; arguing that Chris actually deserved his compensation (a little more than minimum wage), or that the charity re-donations were implemented upon advice by an expert would not only be aligned to the actual facts, but it would improve the Company’s position in litigation. If you will argue against your own client, you better make sure you have true command of the situation. That wasn’t Cheryl. Her critical thinking skills were simply not there. Being a criminal defense attorney, she believed Chris was a fraud and believed the companies would be hurt in trying to align with him while bifurcated, even if Chris’s personal expenses were refunded to him from incoming donations as his form of an employee salary was the truth.

Let’s talk about the SEC for a second. Their mission, of course, is investor protection. If you have been following this blog, you know I am critical of the SEC when it comes to crypto-related matters, and that extends through the Gensler-era. My thesis has always been that crypto is not investing, and any policy outcome that doesn’t demand that disclosure, front-and-center, is a loss for America. There is a better way.

The case with the SEC, so far, hasn’t shaped up to be one where investors were prioritized. Were mistakes made? Absolutely. But how does it make sense to bury a promising company into the ground? When all’s said and done, Chad and I were both significant donors to the NSEI. If somebody got hurt, we were at the front of the line. All we want to do is to put the issue behind us and get on with the business. The vast percentage (over 90%) of the shareholders (the ones that responded to an internal survey) agreed, when they indicated on a survey that they would support the next iteration of the company under mine and Chad’s leadership. Yet here we are, still fighting and spending money, and I’m sure the SEC has much bigger fish to fry.

What was the SEC trying to do? Chris and I talked about this ad nauseum. We generally landed on the following: The SEC doesn’t want this to turn into a loophole. People are not supposed to use a non-profit/profit structure to backdoor a securities offering, and if unchecked, the structure could create a terrible precedent for society. On that we agreed. Chris actually stopped putting corporate shares into the gift basket in exchange for donations sometime in 2018, before the Wells Notice was delivered. If the goal was to “close that loophole,” I feel that could have been accomplished outside the four corners of the courthouse.

And then, there is the innovation aspect. Agree or disagree with what ASM can bring to the table, but it’s hard to deny that it is, at a minimum, a unique piece of financial innovation in the sports-finance world that deserves careful consideration. Sports investing is better than sports gambling, and we said as much in our no-action relief request:

More broadly, we believe our great nation is on a self-destructing march towards legalization of sports gambling. Through DFS, it’s already happening today. Absent an opposing voice to stop this dangerous momentum, we fear that this march will reach its final destination and cause irreparable harm to society and the sports we all love and cherish. While SEC is not responsible for creating policy, it is well within SEC’s powers to extend relief to market participants for reasonable cause. Operating under relief, in turn, would allow us to engage in a policy debate that we feel our nation desperately needs.

Those words were from 2016. I’m not going to apologize to anyone for seeing where this thing was headed, advocating for a much better alternative to gambling and asking the regulator to collaborate with us. The SEC is not legally obligated to respond to no-action requests and it was surprising for me to find that out, but the law is the law. To this day, I am disappointed as to why they never responded to it. Was it because we weren’t represented by counsel and so they simply didn’t take it seriously or was it something else? It would have been nice if the SEC, instead of taking no action on our no-action relief request, engaged with us. All the talk about onshoring innovation rings hollow when we had, and continue to have, the most interesting innovation in this space. The SEC wasn’t legally obligated to engage, but America would be much better off if they had.

Finally, Chris. We had many exchanges after litigation commenced. We never quite agreed on whether what he did was the right strategy. From my vantage point, this was all predictable. It is true that I didn’t raise objections initially. My risk antennas started buzzing later on. It is also true that I willingly participated in the donation program through the end of 2016 (In my records, I see one donation from me in 2017, and none afterwards). But I started making a big fuss in late 2014, and strongly advocated for a securities counsel. That recommendation of mine wasn’t attended to.

Why? Why did Chris and I agree on so many things, but this one turned out to be our biggest disagreement? Ask him, and he will tell you that this was the only thing that made sense. That this risk was necessary for the company to have a fighting chance. That he was the one in the control tower, not me, and things looked very differently from where he sat. He also exclaimed that he would be the one willing to fall on the sword if it came down to it.

I identified a risk, made a recommendation, and my exact concern materialized. To this day, it’s very difficult for me to even consider the possibility that Chris may have made the right decision. But the reality is we have not lived the counterfactual. Chris was adamant that was the only way the company could survive. I saw an unnecessary legal risk; he saw a necessary one. I suppose it is possible that his concerns could have materialized too if he hadn’t taken that risk. Perhaps in that world, there would be no SEC litigation. But in all likelihood, there would be no ASM either. It is true that the company still has a fighting chance of survival; a narrow one for sure. It is still hobbling, but it’s not dead.

I did get an amazing legal education out of it, and maybe that was one of the reasons. You know I don’t have a J.D.–I learned the law the way you would learn a language on the streets as opposed to the school halls. The litigation with Leon, litigation with the SEC, writing briefs, discussions with attorneys, reading transcripts; it was all part of the education.

The other result of all of this? The ASM market design was never litigated in the SEC case. Chris actually ended up not implementing the $2,500 annual investment-limit idea either, instead treating those deposits as donations. Maybe, instinctively, he realized that not only was litigation a necessary risk to take, but he also preferred a compliance litigation (a debate over securities offerings without registration) to a market-design litigation (a debate over whether SportShares are gambling or not). He, and the company, lived to tell through the Seth Leon litigation, but maybe another gambling litigation would have been too much. I can’t shake the feeling that Chris may have been, all along, trying to protect ASM from external pressure until it was ready to finally bloom.

Looking Ahead

Chris has strong feelings toward the attorney profession. Where I disagreed with him was in the generalizations. If an attorney is knowingly lying when drafting a complaint or in the courtroom, obviously that behavior is not proper.

When I read the final brief Cheryl put together–after it was submitted, the only time I read the whole thing in full–I woke up with a knot in my stomach. I wanted to puke. That feeling never fails. It’s my conscience telling me that something is off and I deviated from my internal compass. I always told Chris that I never threw him under the bus, and that was truthful. I didn’t. But I lost control of the process, and the resulting product was grossly unfair to him and largely disconnected from reality.

For starters, there were some inaccuracies in the write-up and I had the factual evidence to prove it. I requested from Cheryl that the factual inaccuracies be corrected. A simple amendment would have done it. I think she actually amended the brief but didn’t implement all my comments. In her mind, perhaps the corrections would not have helped the story she wanted to tell. For me, it has always been the other way around. If the facts don’t help me, so be it. I don’t claim to be mistake-free, but I have always tried to live a life where I don’t mind if the whole thing becomes the front page of the New York Times.

So factual inaccuracies were already bad, but there was also a bigger problem. Many relevant facts didn’t make it into the brief at all. Most of the valuable context was lost. The same way Leon was successful in painting a picture of Chris running a bunco operation and gambling scam, the company’s own counsel was able to manufacture a perception that was somewhat similar.

It was too much for me. I was never an employee or a formal advisor of the company even after Chris stepped down at the end of 2022. Chad is the CEO and I had been funding the litigation, hoping that the issues could be resolved so we could get back to business. Because of how the litigation transpired, with the process going in a direction that I was absolutely not comfortable with, I told Chad that I was out and would not be funding the litigation further.

Chad and Paul, a longtime ASM supporter and an informal advisor, took a different view. After I had stepped out of the process, they spoke to Cheryl and she explained to them what would give the company the best chance to win. I wanted to part ways with Cheryl, they elected to continue. They held the position that it was too far along in the litigation that the judge would not have allowed a change of attorneys anyway. I don’t blame them for their decisions, and I still work with Chad every day and will likely add Paul to the roster again at some point. I understand they were trying to find a glimmer of hope somewhere, a life jacket of some sort. We have been through so many trials and tribulations, it certainly is exhausting after a while simply trying to do the right thing only to hit another obstacle. I suppose that’s why they say that overnight successes were 15 years in the making.

All that said, it was obvious where the whole thing was headed. A badly told story, disconnected from reality that suggested Chris was a villain, it was obvious to me that the approach would not result anywhere close to a successful resolution. Best for the client? Not even close.

At the end of the day, I was proven correct in my own legal assessment. The D.C. District Court handed the SEC a judgment for the full amount of disgorgement based on D.C. precedent, but it did offer a glimmer of hope when reducing the penalties by 91%. All in all, it was still much heftier than we were all hoping and Chris was handed down a penalty of his own.

One day, Chris may be proven correct about his survival assessment. It is possible that one day, we will all look back and understand that the world has what it needs and if it wasn’t for Chris and his choices, which at the time certainly felt like reckless behavior, ASM would have been dead.

We’re not there yet. ASM still has a ways to go. The litigation is still in appeals and unresolved. I am back on board with ASM and we have hired professional securities counsel to represent us, arguably where we should have been all along. We are also constantly searching and making more connections in the sports-finance world.

It has been a long road. A very long one. But we are all unified and marching toward the same goal.

Most importantly, there’s still hope. Sometimes, that’s all you can ask for.

Thanks for reading Full Court Press! This post is public so feel free to share it.

Chris would later recount the conversation in his testimony: “She’s like, ‘... You have to take some portion of your donation income and redirect it to a registered charity. You can pick it. It doesn’t matter which one it is.’ I said, “How much?” She said, “10 percent, at least 10 percent. Redirect it to some charity that you pick so that you have an immediate charitable benefit on the way to your bigger goals.”

Origins III: When A Question Chose Me

Alper Ozgit — Thu, 25 Jun 2026 13:03:25 GMT

After many sleepless nights, early mornings fueled by strong coffee, and countless hours staring at statutes and court opinions, I finally found the question I had been looking for:

Is sports performance an excluded commodity under the Commodity Exchange Act?

The year was 2013. Before prediction markets became mainstream, before the repeal of PASPA, even before daily fantasy sports became a national phenomenon. Outside Nevada, there was no meaningful market for betting on sports.

Yet the question was already there. Not many people were asking it, and even fewer appreciated where it could lead. But if you traced the statutes, the history, and the incentives carefully enough, you could see it bubbling beneath the surface. I was convinced that if it remained unanswered, it would eventually force the courts to confront problems they weren’t prepared to answer.

So I did something that, in hindsight, seems almost absurd: I turned that question into a petition for the Supreme Court of the United States.

A Predictable Future

Sports performance was a commodity, even back then. My conclusion wasn’t driven by prediction markets—there were no mainstream prediction markets to defend. It emerged from reading the Commodity Exchange Act, studying financial history and trying to answer the question honestly.

My request to the Court was straightforward. I asked the Supreme Court to answer the question by granting certiorari. In a nutshell, the argument was this:

The fact that sports performance is perceived at the margin in the universe of all possible commodities is precisely the reason why this case is an ideal vehicle to draw the boundaries between state regulated gambling and federally regulated capital markets. While the boundary question could arise through other financial innovation, no other dispute involving a novel financial contract would be so polarizing and powerful to draw the boundaries between state and federal regulation. Consequently, the clarification of these issues by this Court would deliver the maximum impact. Therefore this Court should grant certiorari.

I also warned what would happen if the Court declined to answer the question:

Innovation paralysis and litigation jam is an intolerable future when our Nation is just trying to get back on its feet following a severe economic crisis.

And later:

How can one enforce financial transactions against challenges that they are unenforceable gambling contracts under state law? The 19th century courts were clogged trying to answer this very question…Absent immediate clarification by this Court, our nation will enter into another period where the courts are clogged with decisions that are inconsistent and conflicting with each other.

I wrote those words in 2013.

Thirteen years later, they read very differently.

Litigation jam is no longer a prediction. It is a description of the world we now live in.

PM Tracker Courtesy of Lexicon Labs

To be clear, this wasn’t some prophetic insight or extraordinary act of foresight. The conclusion was almost inevitable if you were willing to study the history, understand the gaps in the law and think carefully about incentives.

And it all came down to one word.

As I wrote in the petition:

The problem, at the core, has always been the inability to define gambling.

Thirteen years later, I still don’t believe that question has been answered. If anything, we’ve managed to build an entire industry around avoiding it.

Which raises an obvious question: How did a Ph.D. economist end up writing a petition to the Supreme Court of the United States in the first place?

A Brief Recap

If you’ve read Origins I and Origins II, you’ll recognize some of what follows. If not, here’s the condensed version:

My Ph.D. in economics unexpectedly led me to a sports finance start-up in Costa Rica founded by Chris Rabalais. Chris believed sports belonged in the financial markets, and he wasn’t content to simply build another betting platform. He wanted to build regulated financial products around sports.

His first attempt was AllSportsMarket® (“ASM”), a sports trading marketplace. To determine whether the concept could survive regulatory scrutiny, he retained one of the best lawyers he could find: Paul Architzel, principal architect of the Commodity Futures Modernization Act. Architzel saw promise, but he also saw legal risk.

So Chris pivoted.

Working with former Acting CFTC Chair, Sharon Brown-Hruska, the team developed SportsRiskIndex® (“SRI”)—a sports risk management product designed specifically for commercial hedging rather than gambling. A designated contract market was lined up. Meetings with the CFTC were held. All that remained was an informal meeting between the Division of Market Oversight and the Commissioners.

Then the financial crisis intervened.

Our DCM partner, USFE, didn’t survive and SRI was left without a home at the 1-yard line. As devastating as that was, it wouldn’t prove to be Chris’s biggest challenge. While pursuing federal regulation, he was blindsided by a lawsuit from one of ASM’s most active traders.

His name was Seth Leon.

The Leon Lawsuit

At the time, Seth Leon worked as a statistician at UCLA, my alma mater. He was also one of the most active traders on ASM. Perhaps because of his statistical background, he quickly recognized something many others missed: On ASM, winning streaks mattered.

ASM wasn’t a sportsbook. It was a marketplace where investors bought and sold SportShares®. Every trade generated commissions that funded team dividend pools. Winning teams accumulated reserves, and a portion of those reserves were periodically distributed to shareholders as well as after wins. Similar to the New York Stock Exchange, price reflected market expectations. Dividends reflected both trading volume (popularity) and what happened on the field (performance).

Chris described ASM as “The World’s First Sports Stock Market.” It wasn’t just a slogan. It reflected how he thought about the business.

Leon understood the mechanics. He invested heavily in Duke men’s basketball. Under Coach K, Duke went 32-4 that season. Leon’s account value grew dramatically. By the time the dispute arose, it exceeded $379,000, consisting of approximately $159,000 in cash, $94,000 in SportShares valued at the last quoted market prices, and roughly $125,000 in internally valued shares of ASM’s parent company that had been gifted to Leon. He then began requesting withdrawals from his account.

There was one problem: The company didn’t have enough cash in its treasury to satisfy those requests.

Over time, I came to believe there were only three plausible explanations. The company could have suffered from gaps in execution, the market design itself could have been fundamentally flawed, or Chris could have been running a fraud.

The courts ultimately embraced the third explanation.

I never did.

Not because Chris was my friend. Not because I had money invested. But because I had witnessed a very different story. I watched Chris spend years trying to bring sports into the federal regulatory framework. I watched him retain Paul Architzel and later Sharon Brown-Hruska. I sat in meetings at the CFTC. I watched the SRI emerge after experienced counsel concluded ASM faced regulatory uncertainty. I watched Chris repeatedly abandon ideas his advisors considered legally risky, even when doing so came at enormous cost.

None of that proves Chris ran the company perfectly. But it paints a very different picture from someone intentionally setting out to defraud investors.

The Problem, As I Saw It

My understanding of these events comes not only from what I witnessed firsthand, but also from years spent reviewing hearing transcripts, correspondence, and subsequent court filings. One of the most comprehensive summaries appears in Christopher Rabalais's 2021 California Court of Appeal opening brief, which Chad and I drafted on his behalf.

6.21.21 Appellant's Opening Brief

467KB ∙ PDF file

Appellant Chris Rabalais's Opening Brief

The problem, as I saw it, wasn’t that the court acted in bad faith. The problem was that it was presented with only one of two competing narratives.

The first narrative was the one I had lived through:
An entrepreneur trying to bring sports into the financial markets. Years spent pursuing federal regulation. Advice from nationally recognized experts. Meetings with the CFTC. A complete redesign of the product after counsel identified legal risk. Repeated attempts to take the harder path rather than the easier one.

The second narrative was the one presented in court:

We’re dealing with a bunco operation here, that is, taking money from poor people and middle class people, running a gambling scam on the internet…

That was how Leon’s counsel described Chris.

A month later, Chris made an attempt to tell his side of the story. His attorney asked the court for permission to let him read a statement into the record.

The answer was one word.

No.

The Changing Narrative

Leon’s original complaint alleged that he had invested on ASM:

Seth Leon began investing on the ASM exchange in November 2004.

That wasn’t a trivial choice of words. It reflected, at least initially, how Leon himself understood it.

The narrative changed.

When Leon’s counsel argued that Chris was operating a “gambling scam on the internet,” the court recognized the problem:

So if I’m correct, Counsel, the significance is if it is gambling, then that’s not lawful under California law, and therefore you wouldn’t be allowed to recover.

That should have ended the discussion.

If ASM was gambling, Leon’s claims were likely barred. If it wasn’t gambling, then the fraud theory built around gambling collapsed.

Instead, the narrative changed again.

Leon no longer argued simply that ASM was gambling. His counsel now maintained that Leon had been tricked into believing it wasn’t gambling:

It’s our position that whether this was technically gambling or not gambling, the plaintiff was tricked into believing it was not gambling.

I never understood how those positions could coexist.

If ASM truly was gambling, recovery should have been barred. If ASM was not gambling, then Leon could not have been deceived into believing it wasn’t. To me, those two theories could not both be true.

Yet somehow they became one.

The Power of Labels

Judges can decide cases only on the record before them. When important facts are missing, legal conclusions inevitably rest on an incomplete foundation.

By the time the litigation was over, Chris had gone from entrepreneur to “bunco artist.” ASM had gone from financial innovation to a “Ponzi scheme.” Years spent pursuing federal regulation, working with nationally recognized experts, and developing SportsRiskIndex had largely disappeared from the story.

The court ultimately described ASM this way:

“[T]he fraud that’s permeated this entire enterprise… On its face it seems to be a clear Ponzi scheme. You don’t actually own anything. You need new investors to keep coming in. So it either seems like a Ponzi scheme or gambling or something other than a true investment platform. Something I can’t figure out in spite of the doctoral thesis or whatever that it purports to be. The only way this would really work is if you actually had true derivatives and all the sports teams agreed to be bought and sold and traded. Otherwise it’s fantasy football.. If it looks like a duck and walks like a duck, it’s a Ponzi scheme or gambling….” (emphasis added)

I remember reading those words and thinking they were profoundly wrong.

Not because Chris lost.
Not because I lost money.
But because, as a matter of financial concepts, the court fundamentally misunderstood the market.

I had watched an entrepreneur abandon ideas his advisors considered legally risky. I had watched him pursue the harder path rather than the easier one. I had watched him spend years trying to bring sports into the federal regulatory framework.

I had watched an entirely different story unfold.

And because Chris was never allowed to fully explain his side of the story, the story I had watched never made it into the courtroom. The interactions with the CFTC, the pivot from ASM to SportsRiskIndex—none of it meaningfully made it into the record on which the court based its conclusions.

Instead, what remained were labels:

“Bunco artist.”
“Ponzi scheme.”
“Gambling.”
“Something other than a true investment platform.”

Those weren’t merely colorful descriptions.
They became legal conclusions.

I didn’t realize it then, but that opinion changed the trajectory of my career.

One lesson stayed with me.

When I see someone change positions in litigation, my instinct is to ask why. Conflicting statements don’t automatically prove someone is wrong, but they are often the first sign that something deserves closer scrutiny.

In this case, I couldn’t reconcile the competing theories. If ASM truly was gambling, recovery should have been barred. If it wasn’t gambling, then the fraud theory collapsed. What I couldn’t understand was how both propositions could coexist.

I became obsessed with definitions—not as an academic exercise, but because I had seen how profoundly they could shape people’s lives.

That experience didn’t just make me question one court opinion.
It made me wonder how many legal outcomes begin with the wrong definitions.

A Different Return

There are plenty of procedural twists and other details that are not discussed here. In any event, they’re all in the petition and in the brief included above. The short version is this: Leon deposited approximately $31,000 and successfully withdrew roughly $27,000, leaving him with an out-of-pocket loss of about $4,000. The litigation, however, quickly became about something much larger: The value of his ASM account.

The court ultimately awarded relief that bore little resemblance to Leon’s actual economic loss. It treated SportShares marked at their last quoted market prices and internally valued shares of ASM’s parent company as though they were realized assets, even though Leon had no cash entitlement to either. In my view, that was a fundamental accounting error.

My own out-of-pocket loss was more than twice Leon’s. I could have pursued the same path. I could have ignored the bigger picture and simply tried to maximize my recovery.

The recovery never interested me. The puzzle did.

What had actually gone wrong? What exactly was this market? Why did intelligent people reach such radically different conclusions about whether it was investing, gambling, or something else entirely?

Only years later did I realize I had received a return far greater than any lawsuit could have produced. Not a financial return. An intellectual one.

The investment I thought I had lost ultimately became the education that shaped everything I built afterward.

Chris never appealed the California judgment. Whether because of limited resources, the focus on SportsRiskIndex, or simply exhaustion, I honestly don’t remember. Life quickly unraveled. He lost the support of his team and principal financial backer, went through a divorce, fell behind on his mortgage, and ultimately filed for bankruptcy.

Leon intervened in the bankruptcy proceedings, transforming what had begun as a California state court dispute into a federal case. Chris argued that the state court had fundamentally misunderstood ASM, but neither the bankruptcy court, the district court, nor the Fifth Circuit ever reached that question. Instead, each concluded that–even assuming the California court had erred–the federal courts lacked authority to revisit the state court’s judgment.

The Fifth Circuit explained:

Even assuming, arguendo, that the California court erred by describing ASM as gambling or a Ponzi scheme, the bankruptcy court correctly concluded that it could not revisit that characterization. Generally speaking, bankruptcy courts may not sit as appellate courts and revisit the merits of state court decisions… Rabalais’s “attack” on the California court’s decision making ought to have been raised on appeal in the California court system, not before a federal bankruptcy court. Like the bankruptcy court, we lack the authority to review the decision of the California court.

Chris wasn’t ready to let it go. If the lower federal courts couldn’t revisit the California judgment, there was only one court left that could.

The Supreme Court of the United States.

Speaking Finance, Learning Law

Chris asked for my help.

By then, ASM was effectively dead, and so was the SRI. Chris was trying to rebuild his life. I was in a different position. I still had my job at PwC. I had lost roughly $140,000 on my investment, but I had long stopped thinking of it as simply a failed investment.

Looking back, it was the price of admission.

I didn’t get a financial return. I got something else entirely: A front-row seat to the creation of two sports-based financial products, years of conversations with nationally recognized experts, countless discussions about gambling law and financial regulation, and practical experience that no classroom could have given me.

I sometimes joke that I accidentally earned two more graduate degrees—an MBA concentrated in finance and another in law. Expensive tuition, perhaps. But I have never regretted paying it.

Helping Chris wasn’t about recovering my money. There was nothing left to recover. Even if we somehow succeeded, it wouldn’t put a dollar back into my pocket. It would simply remove a crushing liability from Chris’s.

But we had a history, and the intellectual challenge was impossible to ignore. So I said yes.

Writing a petition to the Supreme Court is difficult even for experienced lawyers. I wasn’t a lawyer. I had helped Chris with portions of earlier briefs, but I had never written a legal document from beginning to end. That was intimidating.

Then I reminded myself that while I didn’t speak the language of law fluently, I already spoke another language: Finance.

My UCLA dissertation examined sports betting exchanges and traditional bookmakers. At ASM, I watched one sports-based financial product evolve into another after experienced counsel concluded that the first might never escape the gambling label. I had spent years working with Paul Architzel and Sharon Brown-Hruska, sat in meetings with the CFTC, participated in product development, and even had my name on documents that would eventually become patents.

None of that made me a lawyer. But it meant I understood the financial problem before I tried to understand the legal one.

Finance and law are more closely related than people think. They are less like different disciplines than different languages. More like Italian and French.

Once I stopped worrying about what I didn’t know, I simply let my brain do what it had always done.

During the day I was committed to PwC. Mornings and evenings belonged to my family. Everything else belonged to the petition. Late nights. Early mornings. Weekends. Whatever I could find.

Then, after days—maybe weeks—of reading cases and staring into empty space, it dawned on me. This wasn’t really about fraud. It wasn’t really about bankruptcy. At its core, it was a state-versus-federal question.

The California court's conclusion rested on its characterization of ASM as gambling. But what if that threshold question wasn't for a state court to answer? States undoubtedly retain authority over traditional fraud claims. But when the alleged fraud turns entirely on the legal character of a novel financial market, was that ultimately a question of state law or federal law?

Years earlier, Paul Architzel had pointed us in that direction. Looking at the issue more carefully only confirmed what I suspected:

This wasn’t simply a state-law dispute. It was a federal question.

There was no media attention. No public buzz. The petition was attached to an obscure bankruptcy case. If there was any chance of getting four Justices interested, it had to be because the question itself mattered.

When I shared the idea with Chris, his response came back almost immediately:

“Alper, there is no doubt your thinking is growing on this and in all the right directions. It sounds like you are saying that we make this into a state/federal power case right at the core. My first reaction is electric. I think that just might be the sex appeal that gets us four votes.”

Chris wasn’t always the strongest executor. But when it came to the big picture, he often saw things well before others. On this one, we saw the same thing.

States, Take a Look

Chris filed the petition. If you’re curious, I’ve included it here:

Allsportsmarket Supreme Court Petition

471KB ∙ PDF file

Then came the difficult part.

The question was, in my view, an important one. But importance alone rarely gets the Supreme Court’s attention. There was no circuit split. No nationwide litigation. No public debate. The issue was attached to an obscure bankruptcy case that, on its face, looked like nothing more than a dispute between two individuals.

If the Court was ever going to care, someone else had to demonstrate that the question mattered.

So Chris started knocking on doors.

Every state attorney general received a copy of the petition, along with a letter explaining why the case deserved attention. The list reads like a who’s who of American politics: Pam Bondi in Florida, Kamala Harris in California, Beau Biden in Delaware, and Eric Schneiderman in New York—years before his office would become one of the country’s most prominent voices in the daily fantasy sports debate.

Looking back, I sometimes wonder what might have happened if just two or three states had taken an interest. Ironically, they probably would have argued against us. They likely would have defended state authority over gambling rather than federal preemption.

But that was precisely the point.

If several states had told the Supreme Court that this case implicated the balance of power between the states and the federal government, perhaps the petition would have looked different. Perhaps the Court would have taken it. It may even have ruled against us.

We’ll never know.

I don’t recall receiving a single response from a state attorney general. There was some interest from the media, but it never gained meaningful traction. The petition remained what it had always been: One important legal question hidden inside an obscure bankruptcy case.

Predictably, the Supreme Court denied review.

It was the right question.
Just fifteen years too early.

Looking Back

There is one moment in this story that I keep coming back to. At the time, it seemed like just another damages ruling. Almost fifteen years later, I see it very differently.

During the proceedings, the judge openly recognized that he stood between two very different measures of relief. On one side was Leon’s actual out-of-pocket loss—approximately $4,000. On the other was an account value approaching $379,000, built largely on unrealized SportShare prices and internally valued shares of ASM’s parent company. He understood the dilemma:

So it’s either $379,026.14, which would be the expectancy, or $4,000 plus interest from the date requested.

A fork in the road… Minutes later, the Judge revisited the fork again:

So here’s what I’m going to do. I’m going to take this under submission. It’s going to be one of those numbers. $4,000 plus interest from 8-02-08 or the larger number. My tentative is the larger number because of the expectancy damages and the fraud that’s permeated this entire enterprise.

The court chose the latter.

A few months later, as part of an application under the U.S. Treasury Department’s Making Home Affordable mortgage modification program, Chris prepared a detailed statement of his household finances. As of May 11, 2010, excluding any value attributed to ASM’s parent company, his household net worth stood at negative $375,600.47. Leon’s judgment totaled $379,346.14.

The two numbers are almost identical.

By Chris’s own account, he was already in a “very financially precarious situation.” He cited legacy ASM debt, the loss of income, startup expenses for new business ventures, delayed revenues, and an unexpected increase in his mortgage payment. The court, therefore, was not choosing between financial stability and financial distress. That ship had already sailed.

Looking back, the judge wasn’t simply choosing between two measures of relief. He was choosing between two very different futures for Chris.

One would have left Chris with virtually nothing: A difficult place to begin again, but one that still left room for hope. The other imposed a judgment almost exactly equal to his entire negative household net worth.

The judge made a choice. Chris didn’t have one.

Had Leon simply been made whole, Chris would not have carried a judgment of that magnitude into bankruptcy. Without that judgment, the bankruptcy would likely have remained just another bankruptcy proceeding. There would have been no federal challenge to the California judgment. No Fifth Circuit opinion. And no Supreme Court petition.

I was standing at a fork in the road as well.

The real choice wasn’t whether to recover my losses. That thought never crossed my mind. It was whether to walk away or help Chris fight on.

I chose the latter.

In the process, I found myself asking a different set of questions. What had actually gone wrong? What exactly was this market? Why did intelligent people—including judges, regulators, lawyers, economists, and entrepreneurs—reach such radically different conclusions about whether it was investing, gambling, or something else entirely?

Years later, I realize we all walked away with something different.

Leon received a judgment.
He never collected.

Chris inherited a burden.
He still carries it.

I thought I had found a question.
Looking back, I realized a question had chosen me.

Is sports performance an excluded commodity under the Commodity Exchange Act?

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Three Paths America Could Take on Sports Gambling

Alper Ozgit — Mon, 22 Jun 2026 20:09:47 GMT

Almost every major disagreement in modern finance begins the same way: When more than one person uses the same word to reference different things.

Over the past few days, an insightful LinkedIn discussion around prediction markets reminded me of that once again. Beneath the surface was a disagreement that wasn’t really about prediction markets at all. It was about what the law means when it uses the word “gaming.” Or, even more precisely, whether Congress actually meant “gambling“ when they used the word “gaming.”

That question has been on my mind quite often as of late. In the latest episode of LexBeyond, I explored how a congressional drafting choice may have unintentionally opened a path toward the nationalization of sports gambling. The LinkedIn discussion approached the same issue from a different direction. When it comes to the future of sports gambling in America, this is yet another reminder that three competing legal frameworks lie beneath today’s prediction markets debate.

Elie’s Question

My starting point was Elie Mishory asking:

As a general point, though, gambling addiction exists across asset classes. People can “gamble” on stocks, options, crypto, real estate, etc. and that gambling can become an addiction the same way sports gambling can. Or am I wrong about that?

What is gambling? My journey with that question began more than twenty years ago with my doctoral dissertation. I didn’t know it then, but that question would follow me for the next two decades—through a start-up investment, Finance2027, Full Court Press, and most recently our LexBeyond podcast. Few legal concepts have occupied my thinking more than the meaning of that single word.

My Response

Elie, I think the quotation marks around “gambling” already contain the answer you’re looking for.
I have always believed that gambling should be understood as a legal concept, not merely a colloquial one. Most of the prediction market debate—and many of the biggest debates in finance—come down to a silent disagreement over what “gambling” means.
Use the word colloquially and almost anything you can buy feels like gambling. Use it legally and the universe becomes much smaller.
So what is gambling? The short answer is games of chance and event contracts that do not serve the public interest. One can argue that the category extends to any futures contract, not just event contracts. That argument was considerably stronger before Congress repealed section 5(g), but I think there is still room for it today. Whatever one’s view on that broader question, event contracts are unquestionably part of the analysis.
So we know that if someone is playing a game, it might be gambling. If someone is risking money on the occurrence of a future contingent event, that might be gambling too. The Brits drafted the Statute of Anne accordingly. That framework lives on in state law, creating much of today’s preemption tension.

A Second Observation

What is notably absent from the gambling definition are ownership interests in businesses, property, and other assets whose existence does not depend on the resolution of external events. The confusion goes back to Hamilton, but I do not think one can gamble on stocks, real estate, or even crypto. The proper term is speculation, not gambling. And not all speculation is reckless.
The addiction problem is real, of course. But the policy response has historically been education and disclosure. Why? Because an asset may generate cash flows, in which case subjective valuation must be respected, or it may generate utility independent of any profit motive. Calling an asset “gambling” would unnecessarily shut down markets for investors and ordinary users alike.
My own cheat sheet is simple:
• Stocks: investing or speculation, never gambling
• Crypto: speculation, never investing, never gambling
• Games: games of chance are gambling; games of skill are not
• Event contracts: entertainment claims are gambling; claims serving an economic purpose are not
Once gambling is treated as a legal concept, the debate becomes one of statutory interpretation: When Congress used the word “gaming,” did it mean gambling? I am convinced that it did.

Where John and I Diverge

John Lothian and I agree on a ton, but we diverge on the last mile. So I wanted to use this as an opportunity to further articulate my position:

I suspect what frustrates John Lothian is not so much whether the federal government has authority over sports event contracts, but three other concerns.
First, the country appears to be moving away from the principles that have historically distinguished genuine risk management from gambling.
Second, the states have likely been operating what amounts to an unlawful off-exchange swap market for years—a troubling prospect for someone who has dedicated his career to the integrity of derivatives markets.
Third, the Commission has increasingly become a one-person show, losing the diversity of viewpoints that a bipartisan five-member structure was designed to provide. Difficult questions benefit from disagreement.
Where John and I part ways, I think, is that none of those concerns answers the separate question of federal preemption.
I agree that the CFTC is not operating as Congress envisioned, that the Executive Branch may not be enforcing the law as Congress expected, and that these are serious institutional problems.
But the question of who exercises oversight is distinct from the question of what is legally permitted. Conflating them makes it harder, not easier, to address either.

Three Competing Legal Frameworks

Stepping back, I believe the debate reflects three fundamentally different legal frameworks for sports gambling in America:

Federal regulation;
State regulation; or
Neither.

Most discussions begin with the question of whether the federal government or the states have the authority to regulate sports gambling. I agree that this is the right starting point, but it’s certainly not the ending point.

Once the proper legal framework is identified, a second question follows: Is sports gambling actually permitted under that body of law?

In my view, the states largely answered the first question incorrectly but the second correctly. The federal government, by contrast, appears to be answering the first question correctly while stopping before the second.

This is precisely how the third possibility opens up. It begins with the same jurisdictional question as the other two: Does federal or state law govern? But answering that question does not complete the analysis. It simply identifies the body of law that must be interpreted next.

The remaining question—and, in my view, the one too often overlooked—is whether that body of law actually permits sports gambling. Only after answering both questions can we know whether the proper legal framework points to federal regulation, state regulation, or neither.

In other words, the real disagreement isn’t about prediction markets. It begins much earlier—with the meaning of a single word.

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Origins II: What Happened at the One Yard Line?

Alper Ozgit — Tue, 16 Jun 2026 23:56:07 GMT

The Meeting That Could Change Everything

“Where is Toronto?”

Really? Of all the questions he could ask, this was the one?

I exhaled. Just like that, the knot in my stomach loosened. Maybe—just maybe—my dream was still alive. Maybe I wouldn’t have to explain to my parents how their $140,000 had vanished. They trusted me when I told them about our little startup and committed some of their retirement savings to it.

And now it seemed the men across the table, the Division of Market Oversight at the CFTC, held the keys to our future.

We were pitching a product that, on its face, was a long shot: Sports futures. We believed in it and we believed it served the public interest.

Do sports and money mix? We set out to prove that gambling was not the only option. And the fact that we were sitting in this room at the CFTC made us feel like we weren’t crazy.

Across the table were seasoned regulators. On our side: Myself, Chris Rabalais (our CEO at the time), our consultants and our exchange partner. You may remember Chris from Origins I, he was the one who conceived AllSportsMarket® (“ASM”) many years ago when he had a hunch: Why does a stock market for sports not exist? He partnered with Ace Underhill, a brilliant coder whose real passion is Hollywood. I was a young Turkish immigrant, a few years into a tax consulting job, with an economics Ph.D. and an obsession with market design who, as I told you in Origins I, has stumbled his way into a Costa Rica sports finance startup. There we were, with an unthinkable proposal: Trade sports futures on regulated U.S. markets.

We walked through the details of the product and handed over our self-certification draft. The table in front of them contained Sports Risk Index (“SRI”) values for Major League Baseball teams as of December 31, 2007. Unsurprisingly, sitting at the top was the New York Yankees at 1,158.60. The Mets followed at 965.13, then the Red Sox at 919.28. Most teams were in the 300–600 range, with a couple below 300.1

Then came a pause—a few seconds that felt much longer. Muscles tightened. The Division of Market Oversight didn’t make final decisions on product listings, but they made recommendations to the five commissioners who did. And those recommendations were usually followed.

In that moment, it felt like whatever words came next would predict our fate.

Were we about to survive—or be shut down?

“Where is Toronto?”

...Wait, what?

As with most entrepreneurs, I was optimistic to the point of delusion. When they asked, “Where is Toronto?”, what I heard was: “We represent the Commission, and we approve this product.”

In reality, it was nothing of the sort. Chances are it wasn’t even a positive signal.

The regulator was simply pointing out that our table was incomplete. The Toronto Blue Jays—the only Canadian team in Major League Baseball—were missing.

There was a simple explanation: We hadn’t yet secured Canadian TV data, so our preliminary index only included U.S.-based teams.

Looking back, it was absurd to expect any kind of decision in that room—or even a meaningful hint. This wasn’t our first contact with the CFTC; we’d had some preliminary conversations that led us there. But this was new territory for them. They needed time to evaluate, digest, and follow procedure—exactly what you’d expect from a government agency doing its job.

Still, walking out of that meeting, I felt elevated.

The High After the Meeting

We met up with Bernie and Alex for lunch to debrief. Bernie Nicholls, the legendary NHL player, was our public face and connected us with professional sports leagues. Alex, a Costa Rican native, was the company’s legal counsel. They’d been waiting anxiously nearby.

I’m pretty sure that if you had surveyed every lunch table in D.C. that day, you wouldn’t have found a group quite like ours: A misfit American who lived in Costa Rica, a Turkish kid barely out of school, a former NHL star for the L.A. Kings, and a Costa Rican lawyer. Startups have a way of bringing together the unlikely.

Were we close? Man, I certainly hoped so.

I was gainfully employed at the time. I knew there were lines I couldn’t cross, and I did respect them. This wasn’t a second job—I knew that was off-limits. I had previously been asked whether I’d consider joining the advisory board (not even the Board of Directors yet), and to stay safe, I declined. I wasn’t receiving compensation of any kind. I barely said a word in the meeting. Still, I felt somewhat… uneasy.

Then again, I figured I might be quitting soon anyway.

I looked down at my sandwich. It was too much. My stomach muscles had started contracting again—the way they always do when I’m stressed. I knew what that meant: Time to unload.

When I came back to the table, I picked up the sandwich and started munching, chatting with the guys.

It was October 28, 2008—a clear, crisp afternoon in D.C. It felt like we owned the town. We were already talking about a baseball launch during Spring Training 2009—less than six months away.

We were close. Real close.

Once we launched, I figured real capital would follow. A C-suite role seemed inevitable. I’d leave tax consulting behind and enter the world of finance full-time.

We were already scouting locations near D.C. for a new office. My wife and I would probably relocate to the East Coast.

Everything seemed to be falling into place.

Nothing could have been further from the truth.

AllSportsMarket Came First

Here’s what was true: The SRI wasn’t supposed to be the lead product. That honor belonged to ASM, the market where traders can trade stock-like instruments of their favorite teams. We would later call them SportShares®.

Traders, myself included, ate it up. There was some decent traction, including some early TV coverage, and the market scaled to thousands of users.

We were approaching genuine VC territory, but there were a couple of issues: One was perception: Chris was running the market from Costa Rica, where he lived at the time, and Costa Rica was considered the mecca of sports betting. But the bigger issue wasn’t even perception; it was the product itself. The reality was people put in money, bought a virtual share of a sports team, and they got paid when their team won. For a skeptical crowd who would take the position that sports and money do not mix, it would be easy to label it as gambling.

What is gambling? Now you know why I started to think about this question early. It was a genuine academic interest colliding with a financial one. After doing a market microstructure dissertation at UCLA, comparing peer-to-peer exchanges with traditional bookmakers, I was now seeing true financial innovation in action. And I absolutely needed to understand what I was getting myself into.

Two Competing Philosophies of Innovation

In the last couple decades, America has seen many entrepreneurs that adopted the approach “Shoot first, ask questions later.” Kalshi and its peers are the latest examples. Go out and sell the product first, and deal with the legal questions later. It becomes this cycle: Sell, make tons of money, use some of that money to hire the best lawyers you can, and by the time the wheels of litigation are done turning, you are probably too-big-too-fail anyway. Your legal arguments get an assist from sheer size, as well as lobbying dollars.

Kalshi is the latest example, but not the first one. Back in 2016, I was in the audience when there was a daily fantasy sports panel at DePaul University. DraftKings and Fanduel had barged onto the scene, and there were many legal issues to consider. Dan Wallach was one of the panelists. Marc Edelman, a legal scholar, was also part of the panel and was visibly frustrated. He did not think it was appropriate for DraftKings to scale quickly amidst serious legality concerns, and he felt that it was even more irresponsible to consider going public as it would bring in a group of public investors who would inherit the legal risks. Dan Werly, now with the Tennessee Titans, had a different take: “If DraftKings hadn’t done this, we wouldn’t be sitting here today discussing this matter.”

There. The two competing mindsets. One is the story of the bold entrepreneur who takes risks to make something happen at all costs. The other is responsible innovation: If you find yourself in an uncertain regulatory environment, sort out the regulatory kinks first.

The latter approach can be very costly. For starters, revenue does not come in unless you have a commercial product. If you go the route of “Compliance first, commercialization later” instead of “Shoot first, ask questions later,” you bleed cash every day. You might say: “Well, this is what VCs are for.” To some extent that is true. But VCs don’t always want to pay you to figure out regulatory compliance. They want to see the product-market fit. They want you to sell. And then the same issue exists with your partners–multiple leagues told us: “Figure out the regulatory piece and come back.”

So there are many headwinds for the entrepreneur attempting to do the right thing. This creates a terrible dichotomy: The most reckless model, which oftentimes isn’t even true financial innovation (really just old vices masquerading as such), is what reaches the market. The real innovation gets stuck in red tape. And as we’ll see in future Origins essays, it sometimes even gains the ire of the regulator anyway.

Chris Hires Alston & Bird and NERA

For better or worse, Chris squarely fell in the second camp. Yes, he did start the market in Costa Rica to see if it had legs. But as the market scaled, he became uneasy. He didn’t want to just barge ahead like DraftKings, and later Kalshi, would do. This is not speculation. This is actually what happened. I know this because I had a courtside seat.

Chris found a D.C. law firm to explore the regulatory possibilities for ASM. They started looking at it, and basically said: This is complicated. You need Paul Architzel for this.

Paul had previously spent more than 20 years at the Commodity Futures Trading Commission and played a pivotal role in the Commodity Futures Modernization Act. Paul then recommended that NERA come in as the economics consultant, specifically Sharon Brown-Hruska, who had just left her acting Chair position at the CFTC. Revolving door? Sure, but working with government employees-turned consultants is helpful for startups that want to navigate through regulatory uncertainty. They know what works. And they were a great duo. Smart, honest, friendly.

Late 2006/early 2007 ASM was the lead product. Then Paul and team gave Chris a legal opinion in February 2007:

Elements of its business model could be interpreted by U.S. authorities as constituting the business of betting or wagering through the Internet, making ASM vulnerable to the risk of enforcement action pursuant to the [UIGEA].

Ouch. This was a bit risky, eh?

I disagree with the gambling characterization. To this day, I’m not aware of a law that would support the conclusion that ASM is a gambling product. That said, I certainly understood where Paul was coming from. He was coming from a good place. He was just pointing out that there will be an uphill battle.

Chris read it the same way. A different person would ignore the opinion and just barge ahead. A different person would have fired Architzel, done some more lawyer-shopping and found one that would produce a more favorable opinion. Most entrepreneurs would be more reckless, something society is confusing with being bold. Chris wanted to be prudent. He didn’t want an uphill battle. But he also didn’t want to give up on his vision of creating financial innovation for the sports industry. So he asked Sharon and Paul: What other financial products can we develop for the sports industry?

Building the SportsRiskIndex©

Sharon came up with a new idea: If we created an index that broadly correlated with franchise revenues, theoretically futures contract tracking that index could be used for risk management purposes. She pointed us to research done by a gentleman named Lou Guth. Guth started with a simple question: What determines the value of a sports franchise? He acknowledged that there were some idiosyncratic factors such as a new stadium or a star athlete with a loyal following, but he also identified some fundamental market conditions “which have a large and predictable impact on franchise value.”

The idea was to resurrect that piece of research and turn it into an index, and then create a futures product that uses that index as an underlying, not unlike S&P 500 futures. The exercise was not so much to create an alternative valuation methodology as Forbes already had sports valuations that were widely followed, but to create a valuation proxy using publicly available inputs so a futures product could be created around them. Sports is a huge industry, and just like any other, it needs risk management tools. The broadcasting deals were improving and the valuations were increasing. Nothing goes up forever though, and other than some bespoke solutions, there wasn’t much that existed in the market that would help sports leagues hedge their risk.

With Guth’s research guiding the process, Sharon and her team started running some regression analyses. In parallel, a preliminary meeting was held with the CFTC to gauge initial reactions. The feedback was promising; they viewed sports like any other industry and were not opposed to a sports futures product as long as there was meaningful price discovery and risk management. Section 5(g) was gone already, but the economic purpose test was still the North Star.

When all was said and done, the SRI’s make-up included:

Attendance;
TV ratings;
Local population;
Local per capita income; and
Existence of a second local team in the same sport.

When Performance Doesn’t Equal Value

What was missing was as important as what was included: Sports performance. Single-game outcomes, deep playoff runs, championships… None of that was factored into our index construction.

Why not? Don’t successful teams create value for themselves? Guth was skeptical:

We also ruled out a number of other possible determinants of franchise value: for example, we found value to be unaffected by a team’s competitive standing in the league.

There were some real-world examples that supported this view. The Cubs were the cleanest case: A perennial underachiever on the field and they hadn’t won a World Series in a century (“The Curse of the Billy Goat” anyone?). Yet they’ve always been a fan favorite and one of the most valuable franchises in baseball. If you’ve ever been to Wrigley Field, it’s not hard to understand why.

NERA’s research confirmed that original conclusion. It showed that there was a long-run, indirect effect of sports performance on team valuations. But statistically speaking, it wasn’t very meaningful. So, in the final specification, sports performance didn’t make the cut.

Even though this was all before the enactment of Dodd-Frank, it was a sigh of relief. It was helpful to discover that the economic analysis didn’t quite support on-field performance as a meaningful determinant of franchise valuation. If it were, it would have created some tension and a host of gambling-related questions.

If sports performance was a meaningful contributor, then index integrity would demand its inclusion, but its very inclusion would have made things somewhat political and could have led to the denial of the entire index futures idea; an unwelcome outcome for not only us, but for the entire sports industry. But because performance was a factor only to some extent, and more so in the long-term, our reason for exclusion was economic, not political.

We effectively gained an assist from the regression analysis. The results naturally converged to one where we could avoid the gambling issues, without sacrificing the integrity of the economic model.

The factors that did make it were all coming from publicly available resources or through agreements with third party vendors. The TV ratings for example, would be provided by Nielsen. Nielsen’s coverage of the Canadian market was still evolving. Hence the question: “Where is Toronto?”

Taking the SRI to Washington

When we walked into the CFTC’s building in October 2008, with a proposed self-certification in hand, there were many thoughtful questions. More broadly, the whole experience, while somewhat stressful, was also very educational and cordial. The Division was engaged, the debates were intellectually stimulating, and the process was principled. Working with the CFTC in 2008 was a great experience overall.

As mentioned, our SRI construction did not include sports performance. Even with that exclusion, the Division was concerned that the product could be used for gambling purposes. A regulator being worried about gambling when the product had literally nothing to do with sports outcomes may seem archaic to you, disconnected from reality, or too strict. But this was our actual experience with the government less than two decades ago. The Division was genuinely worried about contracts that even remotely smelled like they could be gambling vehicles.

The Division wanted to know more about that possibility. They gave us some homework: Could one use the SRI to bet on the outcome in a postseason game based on how attendance figures entered the model?

Sharon and her team did a quick analysis and ran it by Paul. We looked at one team, the Arizona Diamondbacks. The answer was no. The contract moved only a tiny bit in response to a hypothetical win which would then impact attendance and thus the index. The gambling-minded person would not find it attractive at all. NERA wrote something up and we waited. Tic toc, tic toc.

After a few quiet weeks, Paul followed up. On December 11, we heard back from the Division saying the only thing left was an informal catch-up with the commissioners. All signs continued to point to a successful launch. Our designated contract market (“DCM”) partner, the United State Futures Exchange (“USFE”), would formally submit the self-certification drafted, and we would go live.

The Call That Changed Everything

A few days later, Chris and USFE General Counsel Matt Lisle got on the phone to discuss the final steps.

Instead, they spent the call talking about something else entirely.

“We’re not going to make it.”

The 2008 recession took many businesses to the cleaners, and unfortunately, USFE was one of its victims. USFE was a subsidiary of MF Global. They were already not doing very well financially and really needed our product. Ultimately, MF Global would decide to pull the plug on our DCM partner.

Remember, a designated contract market is the license you need. Without a DCM you have nothing. USFE needed us just as much as we needed them. It was the classic symbiotic relationship, and it was unfortunately coming to an end. That said, most failures are also potential opportunities hiding in plain sight, and USFE was no exception.

A Wild, Brief Window of Opportunity

The USFE was considering potential suitors. Chris immediately recognized the potential, telling us:

Guys.. I smell an opportunity to buy an exchange here or at least be part of the syndicate that funds USFE as the exclusive carrier of our products.. basically we have our own market operation AND the killer product of the century.

That was amazing foresight by Chris. It would have been quite the move. We wouldn’t need to worry about finding a DCM, because we would be one. This was a firesale. That DCM license could probably have been acquired for a few million dollars back then, maybe even less.

And if we somehow couldn’t get the SRI futures over the finish line ourselves or achieve commercial success? It would have still been a great asset to own. Arguably, in today’s environment the DCM license would be worth more than $100 million.

Money doesn’t solve all your problems, but cash is king when these types of opportunities present themselves. USFE had a license that nobody other than us was really interested in. But it all happened way too quickly. I was just a couple of years into an entry consulting position with a baby on the way. I didn’t have anything extra. My parents’ $140,000 filled some gaps, but they didn’t have the means to come up with enough capital to acquire a failing DCM. The only other possibility was Nick, our Dutch angel. But the recession was impacting his payment processing business, too. He was about to be tapped out.

The End of the Runway

When ASM was considered to be risky, Chris did the prudent thing and pivoted, which resulted in another great piece of financial innovation. A risk management tool for the sports industry, when none existed. He found the best advisors he could, convinced a DCM to do business with him, and successfully led the regulatory process, together with Paul and Sharon. It was first and goal.

Yet, right at the one yard line, financial innovation was… intercepted. It was nobody’s fault in particular. It just happened.

When MF Global pulled the plug on USFE, our chances of getting the SRI futures through became that much slimmer. If memory serves me right, there were approximately 15 other exchanges at the time, but available capital was drying up for everyone. I could not, in good conscience, ask my parents for more money after the USFE failure; that would have been throwing good money after bad.

Was going back to ASM an option? No, it wasn’t. A few months prior to our October 2008 SRI meeting with the CFTC, Chris had also decided to de-risk that business. Remember, the starting question was whether we would be able to get ASM regulated in the U.S., and Paul not being too bullish on that possibility was part of the reasoning behind why Chris pivoted to the SRI.

In early 2008, Paul became even more conservative when he recommended that ASM stop accepting deposits from U.S. customers (due to regulatory uncertainty). The U.S. segment made up the majority of the company’s business. Agreeing to that change was effectively financial harakiri. Chris, once again, took the prudent route, knowing all too well, that it was going to kill the business.

Between 2003 and 2009, Chris led the efforts resulting in two pieces of financial innovation (an investment product and a risk management product) for the sports industry, which to this day remains unmatched.2 Him refusing to be reckless was the reason we ended up with two. It was, even in hindsight, a good pivot.

Yet, both were effectively dead on arrival. Without capital, the company certainly couldn’t afford buying or becoming a DCM. At that point it had owed NERA and Alston & Bird a significant amount of money (Sorry Sharon and Paul). In July 2009, Alston & Bird stopped representing the company.

What Happens When Everything Stops

A recession wiped out the runway, there were no more meetings with regulators, and the dream we’d spent years building–turning sports into an asset class–suddenly had no obvious legal home.

So, what do you do when a startup loses its exchange partner, its capital, its lawyers, and finally its luck?

You’d think the ordeal would end there, but it didn’t. Just as the SRI lost all its steam on the one yard line, a new threat emerged—one that didn’t come from Washington, or Wall Street, or any regulator at all. It came from a single disgruntled trader in Los Angeles, a courthouse neither of us had ever stepped foot in, and a lawsuit that would drag Chris into one of the darkest chapters of the entire ASM saga.

Coming Up Next On Origins

The lawsuit, the fallout, and the moment everything truly broke.

The underlying index has been specifically developed to track the relative value of various sports franchises. Thus, the Yankees were considered to be more valuable than the Mets, which, in turn, were considered to be slightly more valuable than the Red Sox. The SRI was not a valuation exercise per se, but the index measured the revenue generation capabilities of a franchise, so team indices could be considered as valuation proxies. It wasn’t exact, but roughly, an index value of 1,000 translated to a billion dollar valuation.

Later, the company would be granted SRI patents in China and Canada. The former is abandoned, the latter is still in effect.

Nevada Escalates: What a Contempt Order Against Kalshi Would Mean for the Platform–and for the National Legal Landscape

Chad Deihl — Mon, 15 Jun 2026 19:19:53 GMT

Nevada has now taken the most aggressive step yet in its case against Kalshi. On June 4, the Nevada Attorney General’s Office filed an Application for an Ex Parte Order to Show Cause Regarding Contempt, arguing that Kalshi has openly violated the court’s Amended Preliminary Injunction (May 18th). The filing is blunt: Kalshi was ordered to geofence Nevada users out of sports, entertainment and election markets. While the PI was in effect, Nevada investigators were still able to buy those contracts eight times over four days.

The state’s message is unmistakable: Kalshi is out of compliance and the court must intervene forcefully.

Today I will break down what Nevada is asking for, what the court might do next and why a contempt finding in this case would reverberate far beyond Carson City.

What Nevada Says Kalshi Did Wrong

Nevada’s contempt application rests on a simple factual claim: Kalshi willfully ignored the injunction.

The May 18 Amended Preliminary Injunction was specific; Kalshi is barred from offering:

… sports-related event contracts…election-related contracts… entertainment-related contracts.

The court clarified that the order applied to anyone physically located in Nevada, not just Nevada residents.

Yet Nevada investigators, using standard iPhones on Nevada cellular networks and no VPNs, were able to purchase:

NBA playoff contracts;
MLB game contracts;
A French Open tennis contract;
A Mexico–Australia soccer contract; and
A Los Angeles mayoral election contract.

The filing describes it as a violation of the events just described above:

Specifically, on eight separate occasions, ... a BOARD investigator was able to purchase sports- or election-related contracts…

Nevada and Kalshi present sharply conflicting accounts of what geolocation and geofencing require. In the federal district matter of Kalshi v. Hendrick, Xavier Sottile–Kalshi’s Head of Markets, asserted in his declaration that implementing industry-standard geolocation would be “incredibly costly,” estimating that contracting with a certified vendor could run “up to tens of millions of dollars annually” and would take months to negotiate and integrate.

Nevada’s expert, commercial gaming attorney Dan Reaser, directly disputed that characterization in his own declaration (PDF) filed back in October 2025. Drawing on his experience with Nevada-licensed sportsbooks and gaming operators, Reaser explained that geolocation and geofencing are “routine, widely deployed, and neither technically difficult nor cost-prohibitive” for Nevada-licensed operators. In his view, Kalshi’s decision to build its own system–and to test it using “family and friends”–reflects a voluntary choice to avoid established, reliable solutions rather than any genuine technological or financial barrier.

That contrast becomes even more pointed in light of attorney Dan Wallach’s reference to Kalshi’s own sworn filing showing the company spent approximately $190,000 building its own internal geolocation system–which we now know failed miserably.

See Page 9 of the Plaintiff Reply in Support of the Ex Parte Application (PDF)

Regardless of who wins or loses here, the fact remains that Kalshi failed to, or simply voluntarily chose not to put much effort into this as they continue to maintain that the CFTC has exclusive jurisdiction and therefore Nevada has no authority to require it and that Nevada’s demand could jeopardize Kalshi’s federal designation. On the other hand, it’s only Nevada that is holding Kalshi in contempt right now and firmly relies on local experts that geolocation is standard in regulated gaming, not difficult and not cost-prohibitive. In other words, Nevada operators use it everyday and it appears as though Kalshi’s claim is exaggerated.

One could also say that Kalshi did implement geolocation, they did spend money on it, they did choose a low-budget internal system that was inadequate (relying on IP addresses), they did choose not to use a certified vendor, so they did know that geolocation was required to block Nevada’s users. This all undermines Kalshi’s “we shouldn’t have to geofence”1 argument because they tried it, they did it cheaply, it failed, and Nevada caught them.

Recent figures quoted in this document state Kalshi has eclipsed $4.2 billion in weekly volume, yet they can’t afford to hire a legitimate vendor to geofence Nevada?

What Happens If the Court Grants the Contempt Application?

If the judge agrees with Nevada, Kalshi faces immediate and substantial consequences.

1. A Formal Contempt Finding

This is not symbolic. A contempt finding is a judicial declaration that Kalshi disobeyed a lawful court order. Courts treat this as a serious institutional affront. It becomes part of the record, part of Kalshi’s reputation and part of every future regulator’s file.

2. Disgorgement of All Nevada Revenue Since May 18

Nevada asks the court to order:

“… disgorgement of every dollar KALSHI has earned from Nevada operations since May 18, 2026.”

This is the harshest remedy available. It would require Kalshi to hand over all revenue attributable to Nevada users–even if Kalshi disputes the underlying legality of the markets.

3. Alternatively, Daily Monetary Penalties of at Least $120,000

Nevada proposes a coercive fine:

… a sanction of at least $120,000 each day that KALSHI is not in full compliance.

This number is not arbitrary:

This is estimated by taking KALSHI’s $600 million/day trading volume, dividing by 50 to approximate Nevada’s share of the transactions, and taking 1% to estimate KALSHI’s fees on those transactions.2

The point is to make noncompliance more expensive than compliance.

4. Attorneys’ Fees and Costs

Nevada cites NRS 22.100(3) to request full reimbursement for the emergency filing. This is standard in contempt proceedings and adds to the financial pressure.

5. Potential Escalation if Kalshi Still Does Not Comply

If Kalshi continues to resist, Nevada courts have broad authority to escalate:

Increasing daily fines;
Freezing assets;
Entering default judgment; and
In extreme cases, referring for criminal contempt.

Nevada gaming regulators are not known for timidity.

Why This Matters Nationally: The Ripple Effects

A contempt order in Nevada would not stay in Nevada. It would become a powerful data point for every other state and regulator evaluating Kalshi and other prediction market platforms. Opponents are sure to use this as a persuasive authority in their case filings.

1. It Strengthens the Argument That Kalshi Is a Sportsbook

Nevada’s underlying finding–that Kalshi operates an unlicensed “sports pool” and “percentage game”–is already damaging. But contempt adds a new dimension: Kalshi cannot or will not comply with state‑level geofencing requirements.

Other states may use this to argue:

Kalshi is functionally a sportsbook;
Kalshi’s compliance controls are insufficient; and/or
Kalshi disregards state authority.

This is especially relevant in states like New York, Arizona and Michigan, where similar questions are pending.

2. It Undercuts Kalshi’s Credibility in Federal Litigation

Kalshi’s federal strategy depends on portraying itself as a responsible, federally regulated exchange unfairly targeted by states. A contempt finding undermines that narrative.

Federal judges–especially in administrative law cases–care deeply about good faith. If Nevada proves Kalshi knowingly violated a court order, federal courts may:

Give less weight to Kalshi’s representations;
View Kalshi as a regulatory risk; and/or
Be more receptive to arguments that Kalshi’s markets are gambling.

This could also affect a potential APA challenge, any future CFTC enforcement and the broader question of whether sports event contracts fall under the Commodity Exchange Act.

3. It Gives Other States a Playbook

Nevada’s filing is a template:

Declare Kalshi a sportsbook under state law;
Obtain a preliminary injunction;
Require geofencing;
Test compliance; and
Move for contempt.

States can replicate this sequence almost verbatim.

4. It Pressures Investors, Liquidity Providers and the CFTC

A contempt order signals instability. Investors and partners may reconsider exposure. The CFTC, already under scrutiny for its handling of event contracts, may (although not likely given its recent court filings) distance itself to avoid political fallout.

5. It Complicates the Preemption Fight

Kalshi wants courts to say that federally approved event contracts preempt state gambling laws. But contempt makes Kalshi look like the wrong plaintiff to carry that banner. Courts may hesitate to expand federal preemption for a party that cannot follow existing orders.

In Closing

Nevada’s contempt application is one of the most consequential filings in the entire prediction‑market legal landscape. It is not just about geofencing. It is about credibility, compliance and the optics of a platform that wants federal courts to reshape the boundary between state gambling law and the Commodity Exchange Act.

If the court grants this application, the consequences will be immediate in Nevada–and likely become significant everywhere else.

I’ll be thinking about several follow‑up pieces that build on this moment:

How a contempt finding might affect the New York case specifically, as well as other state‑level actions against prediction‑market platforms.
How this interacts with a potential APA challenge and the CFTC’s posture going forward.
What Kalshi’s strongest counterarguments might be–both legally and factually.
And most importantly, how this could influence the Supreme Court if preemption eventually reaches it, and whether a contempt finding affects the other two Ps in Alper’s 3P Framework: Permissibility and parallelism.

While I have been the COO of Lexicon Labs for quite some time now, I have mostly been working on the back end with the design & structure, as well as working with Alper on his articles and even the LexBeyond podcasts.

I decided that I would like to start chiming in on this space with my first self-written piece. I thank you for taking the time to read it. Happy Monday!

Thanks for reading Full Court Press! This post is public so feel free to share it.

Geofencing and geolocation tend to be used interchangeably but there are some differences. Geofencing is the legal compliance requirement for operators that are required to block users outside the fence. In Nevada’s case, a geofence is supposed to prevent anyone from within the state from being able to access the specific event contracts. Geolocation is the technical accuracy requirement when enforcing geofencing; regulators care whether the operator can prove a user was physically inside the jurisdiction.

My educated assumption here is that dividing by 50, they are referring to the 50 states in their calculation.

It’s Now or Never for the States in Their Fight Against Prediction Markets

Alper Ozgit — Mon, 15 Jun 2026 13:03:39 GMT

Last week I walked through the CFTC’s Notice of Proposed Rulemaking (“NPRM”) and argued that states hold the wildcard: They can legalize high school sports betting. I ended with a question:

The only question is if and when they decide to play it.

Today, let me answer that.

The States’ Misplaced Confidence

The states look at the scoreboard and see this:

I don’t believe that lead is real. But the states, and their advocates, seem emboldened by it. And when Gary Gensler files an amicus brief arguing that Congress never intended to leave this matter to the federal government, they take it as validation. When Gensler talks about Harry Reid, and provides how he interprets what happened in 2010, states are even more encouraged:

They shouldn’t be.

Gensler may seem like the right messenger, but his message doesn’t survive a principled reading of the statute. In fact, I’ve argued before that behind his credentials sits a surprisingly inconsistent intellectual framework:

Setting my thoughts aside, it’s pretty clear that the states believe they are winning. I can absolutely see them staying the course and playing the status quo. If SCOTUS ultimately rules in their favor, nothing changes. No political fight over high school sports betting. No need to play their wildcard. Business as usual.

But if they lose–and I believe strongly that they will–they may discover the window has already closed.

Here’s why:

The Courts Are Not Truth Machines

Near the end of 2025, I genuinely believed SCOTUS would evaluate this matter holistically using our 3P framework in conjunction: Preemption, Permissibility and Parallelism. Using that lens, Chad and I made our SCOTUS predictions:

I’m still confident that SCOTUS will take the case. I still believe they will rule for federal preemption.

I no longer have confidence that they will address all three questions comprehensively.

The answer is simple. For better or worse, courts aren’t designed to be truth machines. They pick the better argument, not the best one (which sometimes isn’t even made). Murphy is the perfect example: SCOTUS resolved a narrow constitutional question and left the real issue–whether states can legalize sports gambling–untouched:

I saw the risk around a narrow and incomplete treatment and warned them in our amicus filing:

“Because gambling contracts (such as sports betting and DFS) constitute financial instruments subject to regulation by the … CFTC, the federal regulatory interest clearly exists and Congress has preempted the field.”

They chose not to engage and states proceeded to “legalize” anyway.

For anyone claiming it had never occurred to anyone (Gary Gensler included!) that federal jurisdiction extended to sports contracts–please stop. This argument has been out there for two decades–being made by scholars and, ironically, by the CFTC itself. Paraphrasing Gensler: Just because you didn’t hear (or like) the message doesn’t mean it wasn’t given.

I may have been the only one who put this argument in front of SCOTUS, but I certainly wasn’t the only one thinking about this:

The Missing Question Nobody Wants to Raise

Is off-exchange swap trading trading an issue someone needs relief on? Yes. However, prediction markets have every incentive to avoid raising this question and the states have even less incentive because they’d be admitting that their licensing regimes have been illegal off-exchange swap markets all along.

So the issue sits there, unaddressed, waiting.

However… If SCOTUS resolves this case narrowly, as they’ve shown a history of doing, and if the states reach for high school sports betting, the issue is not going to sit there unaddressed for much longer.

Listen Carefully to Brian Quintenz

Former CFTC commissioner who later became a Kalshi board member said it best:

All events are commodities, which means all contracts on future events are commodity futures contracts, which means all future event contracts need to be traded on a regulated and registered futures exchange. But if the Commission deems any event contract that involves one of the enumerated activities to be contrary to the public interest, that contract is banned from trading on any registered futures exchange. The contract cannot trade anywhere else either since it is still a commodity futures contract and, if traded off of an exchange would be illegal. (emphasis added)

Clean. Confident. Correct. No ambiguity. Off-exchange trading simply cannot happen regardless of whether that contract trades on a DCM or not.

This bears repeating: Off-exchange trading simply cannot happen regardless of whether that contract trades on a DCM or not.

Now take a look at what he is saying:

“I think both models can co-exist…
Sportsbooks and casinos can operate at a state level if they are legally allowed to.”

This is the money quote and the operative word is:

If.

He is not saying sportsbooks can co-exist unconditionally. He is saying that’s only possible if they are legally allowed to.

And he already told you fives years ago that they are not legally allowed to.

The Lawsuit That Drops the Day After SCOTUS Decides Preemption

I’ve long believed the moment SCOTUS rules for federal preemption, the next day a lawsuit drops on states and state-regulated sportsbooks–arguing, correctly, that they cannot co-exist with federally regulated prediction markets:

I have also believed that the states still have a way to control their destiny:

But, not only do I think that states are not going to do what might be better for them (going after permissibility rather than preemption), but I increasingly believe the states might actually manage to do even worse than going after preemption and taking their chances.

They simply will choose not to abandon the preemption fight. Too much pride. Too much sunk cost and too little incentive. They will ride that train to the bitter end.

And when they lose, they will panic. They’ll scramble for the few breadcrumbs the federal government left behind on the table. The states will “legalize” high school sports betting, hoping to capture one remaining piece of the market. They might even choose to allow some other egregious betting to occur too: Injuries. Yellow cards. Flagrant fouls. Whatever’s left. Squeezing the last drops out of an emptying bottle in an ever-increasing race to the bottom.

And by not swallowing their pride, they’ll, once again, deliver the full course meal on a silver platter to the federal government.

Because now the prediction markets nor the CFTC even need to strike first. They can simply wait it out and let the states become desperate. Then they can just react to that, and win.

A Much Cleaner Federal Lawsuit

The federal government will likely say:

We were happily coexisting. The states expanded into an area federal law does not permit. We’re simply enforcing the statute.

That’s a much cleaner narrative.

Prediction markets and the CFTC are still the ones that initiate the lawsuit, except now they look injured. They point to the NPRM commentary. They point to the statute. They point to Quintenz’s own words.

They don’t even need to attack the traditional sports bets. They simply need to go after the newly expanded event types the states just “legalized.” Why broaden the universe? Establish the principle first: There can be no off-exchange swap trading.

Single-game outcomes, spreads, point totals–those can wait for the next lawsuit which simply becomes a limiting principle case based on established precedent.

And just like that, state-regulated sports betting is gone and it’s all regulated by the federal government.

Why Are States Betting the House on the Worst Possible Reading of the Statute?

I will never understand why states and their advocates insist on putting all their eggs into a single basket, unsupported by the most natural reading of the statute. Some of those people subscribe and read this blog. They know the risks. Yet they continue to plow forward, wearing their pride on their sleeves. Fortunately for them, the CFTC’s newly released NPRM has thrown them a lifejacket.

The states still hold one wildcard capable of flipping the script.

It may also be the only one.

Game Theory Is Useful

Long before I started following prediction markets or commenting on legal issues, I learned game theory. If you think it’s just some obscure technical corner of economics, you would be mistaken. Remember how in A Beautiful Mind, John Nash applied it in a real-life situation when a group of guys were trying to pick up girls?

Ok, that scene is almost certainly fiction, but that doesn’t mean game theory principles cannot be helpful in legal settings. Start with this question:

Would Prediction Markets Really Seek to Eliminate State Competition?

That’s a query that doesn’t receive enough mindspace; it certainly deserves it.

Why wouldn’t they, if they believe federal law is on their side?

Legal strategy and political strategy are different. If the legal posture flips, prediction markets will have every incentive, with no meaningful barrier, to go after the states. Litigation is won in courtrooms, not on social media. And when the incentives line up that cleanly, they’d be irrational not to take the shot.

Which brings us back to the states. They can hope to win at the Supreme Court, but they owe it to themselves to consider what would happen if they don’t. If they can adopt that mindset, then whether the wildcard should be played becomes an assignment of probabilities. If what I’m describing is correct, coexistence will not be a permanent condition. If the likelihood of that event is high enough, then it makes sense to play the wildcard.

Remember, in my last post we left you with a question:

The only question is if and when they decide to play it.

The moment states decide to play their wildcard, the next decision becomes: When. That opens up some additional branches in the decision tree we discussed above. It doesn’t take much to see when the best time will be for the states to pull the trigger:

If they intend to play their wildcard, they may need to do it before SCOTUS grants certiorari—not after.

If the states opt to rest on their laurels and the federal framework is cemented, the nuclear option may no longer exist.

It’s now or never.

Thanks for reading Full Court Press! This post is public so feel free to share it.

High School Sports Betting Coming to America?

Alper Ozgit — Thu, 11 Jun 2026 22:40:05 GMT

High school sports betting might be coming to America.

I know what you are thinking.

“Have you lost your mind?”
“That will never happen.”
“Did you even see the CFTC’s Notice of Proposed Rulemaking (‘’NPRM’’)?”

No, maybe, and yes. Just hear me out.

The Federal Move

The CFTC issued its Notice of Proposed Rulemaking (Press Release). There is a lot to discuss here, but let us take this one step at a time. This passage is our starting point:

The Commission also notes that, to the extent event contracts based on pre-collegiate sports events would yield economically useful information, this use of the event contracts could raise public interest concerns relating to marketing and other commercial use of information related to minors. There may also be public interest concerns related to the disclosure of minors’ personal identifying information. For these reasons, under the Commission’s proposed factors, it would be likely that event contracts involving pre-collegiate sports events would be found to be contrary to the public interest.

Given the CFTC’s stance, our headline sounds… ridiculous?

At first glance, the CFTC and the states appear perfectly aligned. I’m not aware of a single state that allows betting on high school sports. New York, for example, has this prohibition on the books:

Wagers cannot be placed on any sport or athletic event in which any New York college team participates, regardless of where the event takes place, or high school sport or athletic event.

The CFTC’s NPRM would prohibit federally regulated event contracts on pre-collegiate sporting events as contrary to the public interest.

So if federal and state governments are aligned, why would anyone think high school sports betting is coming to America?

Because incentives matter more than intentions.

Prediction markets didn’t choose federal regulation because they love commodities law. They chose it because it scales.

One market.
One rulebook.
One national customer base.

This is also why some state-regulated sportsbooks are adopting a “if you can’t beat them, join them” posture. DraftKings reported in an SEC filing that annualized consumer trading volume on DraftKings Predictions rose 24% month over month to $1.3 billion, and the stock, after a long slump, is moving.

Prediction markets have changed the calculus. Now the CFTC’s NPRM changes the economics by saying:

You can have the national market—but not these products.

Oftentimes, federal carve-outs create a potential business opportunity. Here, the carveout just happens to create a unique opportunity for the states.

Not because states suddenly love high school sports betting, that has always been politically toxic. High school sports are treated as sacred. The incremental revenue was never worth the backlash.

Now, though, the calculus has shifted. If sports gambling migrates to prediction markets, state revenue dries up. The early signs are already surfacing.

At the same time, doing nothing isn’t really an option. But what can the states actually do?

They’re already fighting prediction markets. The trial court scoreboard on our LexCurrent PM Tracker currently reads 11-4, but that score is misleading. Many of those wins came from Nevada, where Judge Gordon’s analysis never really held together:

At the appellate level, states appear poised to win in at least one place. In the Ninth Circuit, a panel including Judge Nelson took issue with Reg 40.11 during the oral hearing; and in all three rulings that came afterward, ruled in favor of the states.1

The states are going to lose this fight. If you need to look past the statute to win (paywall), you’re simply not going to win.2

The need for tax revenue remains as does the need for funding education, youth sports and other priorities. The moment states became dependent on gambling revenue (state “legalization” post-Murphy 2018) was the moment when serious questions needed to be asked. Some did ask them, but the economic incentives carried the day. There’s no reason to think they won’t again.

Maybe the states want to take their chances with SCOTUS. That’s one option.

But the NPRM just gave them another card to play–a nuclear option:

Can states authorize high school sports betting? Why not? Remember how when daily fantasy sports was on life support, New York Assemblymember Pretlow famously argued that the legislature can do anything:

My point is we, as a Legislature, determine what that is, what that crime is and what that punishment is. We, as a Legislature, can today say that wearing a yellow tie is illegal.

The more interesting question is: If even one state makes that choice, what does the CFTC do?

Can you say… stuck between a rock and hard place?

If the Commission does nothing, it will have declared these markets contrary to the public interest while allowing them to flourish under state law.
If it intervenes, it becomes harder to argue that state sportsbooks and federal event contracts peacefully coexist.

That’s the dilemma and the states have the power to force the CFTC into it.

Conclusion

This isn’t really a story about high school sports betting. It’s not even a story about legal arguments–at least not directly.

It is a story about incentives.

You can almost put a fork in the states. They do not have a strong hand and never really did. They just benefited heavily from an ecosystem where most everyone decided to put the blinders on (especially the CFTC), and party early.

Here’s the pressure point:

The moment the CFTC says, “these products belong outside the federal marketplace,” it creates a financial incentive for states to ask a different question:

If Washington won’t offer it, why shouldn’t we?

That question alone changes the game.

It forces the CFTC to respond, and paradoxically, that may be the states’ strongest strategy.

The states hold the card.

The only question is if and when they decide to play it.

Thanks for reading Full Court Press! This post is public so feel free to share it.

Judge Nelson is now facing a judicial misconduct inquiry in an unrelated matter: https://www.reuters.com/legal/government/us-appeals-court-judge-charged-parking-lot-scuffle-faces-ethics-complaint-2026-06-08/

Dan Wallach: “The courts are wearing blinders and just focusing on the plain language of the statute. It's a textual analysis.”

Origins I: Following Roads Without Maps

Alper Ozgit — Wed, 10 Jun 2026 00:05:29 GMT

Sometimes, a road appears before a map does.

We are taught to plan. Pick a destination. Study the route. Calculate the risks. Wait until the uncertainty disappears.

But looking back, every meaningful turn in my life happened in exactly the opposite way.

I didn’t know where the road led. I simply couldn’t stop following it.

At twenty-three, I thought I had a fairly good idea of how my life would unfold. I was studying economics in Turkey and preparing to begin my Ph.D. in the United States. My plan was straightforward: Earn a doctorate, return home, become a tenure-track professor, conduct research, teach students. Nothing unusual. Nothing dramatic. Just the path I had spent years preparing for.

If you had asked me then what questions I expected to spend my career answering, they would have come from economics, and not from law.

Then I received a letter from Los Angeles.

Before that letter arrived, all signs pointed to Penn State. I had also been admitted to Boston College and Georgetown, but Penn State was firmly in the lead. Comparable programs, but Penn State ranked slightly higher, and–most importantly–the offer came with a full scholarship. We weren’t poor, but we weren’t flush with cash either. The financial aid mattered.

UCLA, on the other hand, was a borderline top-ten program, the kind you don’t expect to get into. Yet months earlier, when I first looked at UCLA’s admission requirements, I felt something I couldn’t quite explain. It wasn’t confidence exactly, and it wasn’t ambition. It was a sense of belonging, as if I fit there in a way I didn’t feel with any other school; that feeling stuck with me. So when the letter from Los Angeles arrived, it didn’t just change the calculus–it felt like something that had been quietly waiting for me to catch up. UCLA suddenly became the better choice, academically and personally.

My father disagreed.

To him, Penn State was the obvious answer. A full scholarship at a respected program wasn’t something to take lightly. He went to boarding school at eleven. He learned to manage his life and money early. He wasn’t being stubborn or unreasonable. He was being responsible.

I saw it differently. The question wasn’t the cost of one year’s tuition. It was what that investment might become over the next twenty or thirty years. UCLA was one of the top economics programs in the country. If I was right, the additional cost would eventually become insignificant.

Fortunately, you could reason with my father; he would listen to what I had to say. He worried about an endless pit of expenses, but I was thinking long-term and I really wanted UCLA. Neither of us realized it then, but that conversation would become one of the defining moments of my life.

The compromise? I made him a promise. “Give me one year, and I’ll work my way into my own scholarship.”

He thought about it for a few days and came back with: “One year is all I can afford at the moment. If you don’t get it, you may need to come back home.”

Deal.

At the time, I viewed it as an admissions decision. But it was more than that. It was a consequential step I took on a new road without knowing where it led. I could only see a few hundred feet in front of me. The rest was all fog. I didn’t have a map. I didn’t know the final destination, if there ever was one. I just knew I had to follow the road as it revealed itself.

A few months later, my father and I touched down at LAX.

Everything about Los Angeles felt new. I had never lived on my own. My father helped me find an apartment, set up utilities, and navigate a city that felt impossibly different from anything I had known.

The first year was difficult. Let me correct that: Horrendous. I knew exactly one person in California–my friend from college who had also been admitted to UCLA. I didn’t speak English well. Growing up, I had gone to a German school, so English was my third language. I certainly knew the academic language well because I had studied economics in English, but my conversational experience was lacking. Demand and supply curves don’t get you very far when you are at the grocery store, neither do the kinds of phrases you learn from textbooks: How to ask for directions to the post office, or how to declare goods at customs. Why they even teach that, I still don’t know. Ordering food, asking for the check, or understanding basic slang would have been more helpful. Deutsche Schule Istanbul was excellent, but reruns of Friends and Seinfeld were far more useful to me than what I learned in high school.

Graduate school was demanding, and I felt the pressure more than the others. Many had scholarships. Some likely paid in-state tuition. If anyone else was flirting with a one-and-done scenario, I didn’t know it. For me, going home after my first year was a real possibility.

Most importantly, I had a promise to keep. Sure, going home with my tail tucked between my legs would have been bad. But breaking my promise? That would be the real defeat. Most kids want to show their parents they can do things. I was no different.

Failure wasn’t an option. I poured everything I had into my studies. No bars. No nightlife. No distractions. The shiny lights of LA could wait, I had a promise to keep and a measurable obstacle to clear: A 3.50 GPA. That was the prerequisite to qualify for a scholarship.

When the final report card printed, it read 3.52. Earning the scholarship I had promised my father required every bit of effort I could muster and every brain cell I had to burn.

Barely, but successfully, I kept my word.

By my second year, life started to settle. I made friends. Ebru–now my wife–eventually joined me in California for her MBA prep, and later in Los Angeles, for her MBA at USC. Graduate school was progressing and an academic career still seemed like the natural destination.

There was only one problem. I needed a dissertation topic.

I had ideas. Technical ideas. Respectable ideas. The kind economists are supposed to have. But none of them excited me. They felt like answers in search of a question rather than the other way around. I felt like I was spinning in circles.

A social network model for the telecommunications industry was what I was pursuing. If that sounds boring to you, you are not alone. The idea was literally putting me to sleep.

Ph.D., in some ways, is similar to marriage. The question isn’t whether the choice, your spouse or your idea, is wonderful. The question simply is: Is it a good fit? Theoretical social network models for the telecommunication industry may have worked for others, they just weren’t a fit for me.

Entering my fifth year, I knew this wasn’t going to be my job market paper. The pressure mounted. I needed a direction. I needed to find a significant question; one that I could not only answer, but one that was a solid fit for me.

Then came the Vegas trip.

July 2004. My good friends Levent and Mehmet–Ph.D. students in economics and finance–and I, planned a road trip to Vegas. This wasn’t the time to worry about dissertation topics. We were going to catch up, play card games, and enjoy ourselves.

Like many road trips, the conversations drifted. One particular conversation landed on sports betting. Could one make money by locking in price differences across sportsbooks? Were there arbitrage opportunities?

Levent argued yes. With so many sportsbooks operating around the world, prices would inevitably diverge. Enough difference, and you could lock in profit. He believed there would be an opportunity to make money.

Mehmet, a believer in market efficiency, was having none of it. He argued that such opportunities would either be extremely short-lived or wouldn’t exist at all and any easy money would disappear instantly.

I sat in the back seat listening. Instinctively, I leaned toward Mehmet. Financial markets were generally considered to be efficient. Why would sports betting markets be any different?

But I wasn’t sure. Maybe there were some differences; peculiarities? Frictions?

Where there’s smoke, there’s fire. A spark had erupted into a raging fire.

Two smart people were debating a real question and I was genuinely interested. I realized: This is what a dissertation topic should feel like. Early on, I had recognized the importance of listening to my gut instinct. There was no doubt this was one of those moments. This didn’t become my dissertation question, but it certainly opened the door.

Back from Vegas, I felt energized, rejuvenated even. For the first time, the Ph.D. didn’t feel like a chore. It felt like… playtime.

I explored the arbitrage alley, but it led nowhere. While differences did exist, they were small and transaction fees ate the profits. Another application of market efficiency wasn’t going to excite anyone.

But, this exploration led me to something else: Betfair. A peer-to-peer betting exchange where there was no house. Lower commissions and a different model. Betfair wasn’t your counterparty when you placed a bet, it was simply a platform where you would be matched with another bettor that had the opposite view. Because of that, Betfair did not care about the outcome of the game. Their model insulated them from the risk of losing money if the bettors piled up on one side and ended up being correct; the nightmare scenario for sportsbooks. Betfair simply cared about maximizing the transaction volume.

I always thought the Betfair name accurately described its value proposition. Bet, but at better prices. The business model also happened to trigger a set of questions that a Ph.D. student searching for a topic might get excited about: If Betfair truly offered better prices, why would anyone use traditional bookmakers? Would traditional bookmakers like William Hill and Ladbrokes go extinct? Was I in the midst of a transitional moment in sports betting history?

The coexistence didn’t make sense to me. If one product was better, shouldn’t it replace the other?

Now that was a question worth pursuing.

That question became my dissertation topic. It earned me a fellowship. It landed me a job at PwC. And most importantly, it genuinely excited me.

It was the one.

Watching NBA games while working on my laptop, I gathered sportsbook data. This became one of my fondest memories. It created constraints–no Friday happy hours, early evenings at home–and none of it felt like a sacrifice. It felt like building sandcastles.

Eventually, the answer emerged: Betfair was the better option–but only up to a point. Liquidity, or rather, a lack of it, limited large bets. For a $20 bet, Betfair was a happy place because you didn’t need the bookmaker. With wagers around a hundred dollars, the bids and asks on the exchange started to dry up, and the traditional bookmaker started becoming competitive again. When talking $1,000 or more per wager, there simply wasn’t enough liquidity and you were generally better off dealing with the house directly. The models weren’t substitutes, they were complements.

A PwC colleague and friend would later offer me his definition for Ph.D.: Going through years of grueling research to arrive at a common-sense answer. He wasn’t far off. I did indeed end up with a common-sense answer, but one that required years of research to uncover.

A common-sense answer that also laid pavement for a new path.

Peer-to-peer exchanges were new to me. If cutting out the middleman created an opportunity, what else existed? The search began. One industry review had ranked Betfair first among the major exchange platforms. Second was an exchange I had never heard of: AllSportsMarket (ASM).

I clicked.

“The World’s First Sports Stock Market.”

I pondered. A sports stock market?

I understood sports. I understood stock markets. I had simply never considered the possibility that the two could coexist. That curiosity was intriguing enough to pull me in. I opened an account and started trading. The more I explored, the more questions surfaced. Was this gambling dressed up in financial language? Or was it something else entirely?

Those questions eventually led me to Chris Rabalais, the founder of AllSportsMarket. What began as a few emails turned into longer conversations, and then–thanks to a lucky draw that somehow kept landing on my name–a trip to Costa Rica. When I flew down, I met Chris in person for the first time. Over the next twenty years, he would become a friend, a business partner, an occasional sparring partner, and one of the most intellectually influential people in my life.

Chris had arrived at his own question through a very different road. He had worked as a day trader, then later found himself employed by a sportsbook in Costa Rica. Somewhere along the way, a simple thought occurred to him: Why does a stock market for sports not exist? He scribbled the early ideas on a napkin, and ASM was born. The team began placing ads, and suddenly my path–born from a letter in Los Angeles to a conversation on a Las Vegas road trip that led to my dissertation topic on Betfair–collided with theirs.

When I visited the ASM office in Escazu, it was a small unassuming space in a shopping mall. But inside, the energy was unmistakable. Computer screens glowed with real-time trading activity. People were fully absorbed in what they were building. They looked like they had found their own questions, the ones they felt are worth pursuing. They would eventually become mine, too. What should have felt improbable instead felt strangely natural, as if this was simply the next turn on the road I had already been following.

Looking back now, the sequence of events seems almost too unlikely to be real. But at the time, each step felt like the most logical continuation of the last. A letter from Los Angeles led to a conversation between friends on a road trip to Las Vegas. That conversation led to my dissertation topic, which led to a startup in Costa Rica.

Twenty years later, that same road has wound through conversations with professional sports leagues, regulatory meetings, a proposed self-certification, a Supreme Court petition, eight amicus briefs (including SCOTUS), an SEC lawsuit, a deposition, patents in China and Canada, legal commentary blogs, and a newly developed prediction market tracker called LexCurrent–all while fostering new friendships that I had never expected.

I still don’t know where this road will end, and I’ve stopped expecting it to. The map is drawing itself as I go.

Thanks for reading Full Court Press! This post is public so feel free to share it.

Introducing LexCurrent

Alper Ozgit — Fri, 05 Jun 2026 19:54:38 GMT

How do you know litigation in a specific vertical got a little bit... crazy?

You know when your developer asks:

“Alper, are case IDs not unique? We have the exact same ID in two different cases.”

You know when two oral arguments in two different cases are scheduled for the exact same day, at the same local time, but in different states.

You know when you’ve just finished reviewing all your case data and another lawsuit hits the wires. We’re looking at you, New Mexico.

And you know when your prediction market litigation network starts looking like this:

And this is after deciding not to visualize every single case.

Prediction markets have become one of the most active legal battlegrounds in the country.

We’ve been writing about the subject for more than a year and following the litigation has become increasingly difficult. Cases are spreading across federal and state courts. What began as a handful of disputes now involves platforms, states, tribes, private plaintiffs and the federal government.

There are some excellent resources out there and we’ve benefited from many of them, but the prediction market tracker we wanted simply didn’t exist.

We wanted something more visual. More comprehensive. More intuitive.

So we built it.

Today, we’re launching LexCurrent – a real-time, dedicated intelligence platform for tracking the legal landscape surrounding prediction markets.

This is only the beginning.

Gary Gensler Strikes Out

Alper Ozgit — Fri, 29 May 2026 13:03:58 GMT

Gary Gensler boasts a noteworthy resume. Wharton grad. Goldman Sachs partner. Assistant Secretary of Financial Markets at the U.S. Treasury. Under Secretary of Domestic Finance. Recipient of Treasury’s Alexander Hamilton Award. Senior Advisor on the Sarbanes-Oxley Act. Chair of the Commodity Futures Trading Commission. Teaching at Massachusetts Institute of Technology. Chair of the U.S. Securities and Exchange Commission. Teaching back at MIT.

Whether you agree with him or not, he spent decades at the center of modern finance, regulation and market structure–and few people have shaped the crypto regulatory conversation more than he did. And now, he is commenting on prediction markets:

You don’t have to agree with Gensler on everything just because he has institutional pedigree. But the baseline expectation is that his positions are at least defensible. Plausible. Internally consistent. Those aren’t exactly high bars to clear. They are the minimum expectation for someone who has moved through the upper echelons of finance, academia, and government; including some of the most powerful regulatory positions in the country.

Is it really that difficult to expect that someone who chaired the SEC–an agency tasked with protecting investors–would have a coherent point of view on what investing actually means?

Is it unreasonable to believe that someone who chaired both the SEC and the CFTC would understand how securities and commodities interact with one another?

Is it too much to ask that a former Chair of the CFTC be able to articulate an internally consistent position on federal preemption?

It’s not.

Gensler may very well have good intentions. When he went after crypto, I always had the sense that he genuinely believed the public needed more protection–and in many respects, that instinct was correct.

So I do not think this is about bad faith or some hidden agenda. The deeper issue is that behind all of these accomplishments and credentials sits a surprisingly inconsistent intellectual framework.

The Last Mile, Completed

Alper Ozgit — Thu, 23 Apr 2026 22:23:19 GMT

Last week, we covered the Last Mile Problem In Legal Analysis, the idea that robust legal analysis sometimes stops just short of the conclusion the logic appears to require. Usually, that’s because the conclusion is inconvenient. You walk through a detailed analysis only to discover that your own reasoning leads you somewhere you didn’t want to go:

At that point, the analyst has, broadly speaking, three options:

Option 1 - Acceptance. Inconvenient or not, this is the result; accept it.

Option 2 - Silence. Leave the inconvenient part unsaid. You can sometimes sense this pattern in court opinions.

Option 3 - Denial. Since “absurd” results cannot ensue, go back and change the conclusion.

John Lothian is, literally, a Hall of Famer. Despite that, or perhaps because of it, he can’t bring himself to admit that sports event contracts can be federally-regulated swaps; he ultimately concludes they are not. Today, we’ll walk through his reasoning step‑by‑step, examine where the analysis holds and identify where it breaks. We will be loyal to his nodes of analysis; we will simply repackage his framework and look at it through the Lexicon Lens.

Perhaps the cleanest way to analyze Lothian’s argument is to track his LinkedIn post and, in particular, the comments he made underneath it. Lothian wants to see where the premise that “sports event contracts are swaps” takes him, and his analysis leads him to four conclusions. He is not fond of them–he writes, “The CFTC's broad interpretation of the swap definition creates four key legal and regulatory problems:”

Issue #1 - The Retail Trader Violation (CEA Section 2(e)): If prediction market contracts are classified as swaps, retail participants (who are non-Eligible Contract Participants or non-ECPs) may only legally trade them on a Designated Contract Market (DCM). Trading these products on non-DCM platforms, such as offshore or decentralized exchanges, constitutes a violation of federal law under CEA Section 2(e).
Issue #2 - The Sportsbook Illegality: The same logic implies that the functionally equivalent products offered by state-licensed sportsbooks are also swaps. Since state-licensed sportsbooks are not DCMs and deal with non-ECP customers, these transactions may violate federal law, creating a situation where the CEA’s field preemption could render state-authorized sports gambling potentially illegal.
Issue #3 - Contradiction of Congressional Intent: The CFTC’s regulatory openness to these products contradicts the legislative record of the Dodd-Frank Act, which specifically placed “gaming” on a list of activities the CFTC was authorized to prohibit. Congress originally intended to bar event contracts that “exist predominantly to enable gambling”.
Issue #4 - Erosion of Definitional Integrity: The interpretation stretches the swap definition, which historically requires a bilateral, executory exchange of a series of payments over time, to include a prediction contract, which is a single, binary, terminal payout. This structural mismatch sacrifices definitional integrity for the sake of regulatory expansion.

Let’s turn this into a table and compare Lothian’s views to ours.

You might observe: “You are mostly agreeing with him.”

We do! For the most part, it’s not his analysis that we take issue with. It’s the moment he re-evaluates his premise when he sees the conclusions; it’s akin to denying that it rained just because we didn’t like getting wet. We must evaluate the existence of rain based on standalone reasoning, not the outcome.

To do that, we need to separate three concepts that are often blended together–sometimes consciously, sometimes not.

The 3P-Framework: Preemption, Permissibility, Parallelism

We’ve discussed this in many places. This podcast is a great place to start:

The False Binary - Ep. 17

Key Takeaways…

5 months ago · 1 like · Lexicon Labs and Alper Ozgit

The key insight: Prediction markets give us a three-in-one special. Three legal questions, all of which must be resolved:1

Question 1 - Is sports a commodity/are sport event contracts swaps?
(federal jurisdiction)
Question 2 - Are sports event contracts permissible?
(gaming/economic purpose)
Question 3 - Can there be an overlap between federal and state powers?
(off-exchange futures trading)

We aren’t the only ones who see this. Here’s Andrew Ross Sorkin chatting with Michael Selig on CNBC–touching on all three:

ARS’s first statement:

This is a federal issue vs. a state rights issue. That’s what this seems to be about.

That’s the preemption part of it. Not all of it, but the right starting point.

Then ARS observes:

But Mike, you do recognize… For a very long time… there were remarkable debates… about whether there should be sports betting. Whether it should be allowed.

That’s the permissibility part.

A few minutes later he asks:

There’s a question about, if you’re a state, whether you should have any say… at all?

That’s the parallelism part. Now the trio is complete.

Within five minutes, Andrew Ross Sorkin got to the bottom of the issue. That’s what smart journalists do.

The problem? The courts are not dealing with all three questions. They’re not even dealing with two. They are still at the preemption stage, and their hands are full with over 50 lawsuits.

To understand why, you may want to engage with the concept of litigation sequencing:

Lothian’s Framework, Re-Delineated

Lothian actually touches all three questions. He isn’t missing a key issue. He simply doesn’t delineate them cleanly, and that lack of separation drives him to the wrong conclusion. Once we separate the strands, the outcome changes dramatically.

The Retail Trader Violation

We haven’t talked much about this, but we’re in full agreement. If sports event contracts are swaps (and we believe they are), that’s where the law takes you.
This is a preemption and parallelism issue.

The Sportsbook Illegality

We’ve discussed this extensively. One example:

Again, in full agreement with Lothian. If sports event contracts are swaps (and we believe they are), that’s where the law takes you.
This is a preemption and parallelism issue.

Contradiction of Congressional Intent

This is where things get interesting. We agree that Congress did not intend the CFTC to regulate sports event contracts. But what we’re observing today is not a result of these contracts being swaps. It’s the result of the CFTC treating the “gaming” prong very differently than it did just a few years ago, when ErisX attempted the same thing (and theirs were arguably less intrusive because they proposed a self-imposed retail limit).

This is the key distinction. Lothian looks at this and says:

Congress couldn’t have intended a nationalized sports gambling scheme,
so these can’t be swaps.

We look at it and say:

Congress couldn’t have intended a nationalized sports gambling scheme, so the CFTC is ignoring the statute (and its own regulations). That’s an APA issue.

The CFTC’s refusal to review Kalshi contracts, and more broadly, its general stance, actions, statements, non-actions and silence regarding sports event contracts, are themselves reviewable agency actions (or failures to act) under the Administrative Procedure Act. Congress did not mandate that the CFTC review every contract, but it certainly expected the agency to conduct a review when the contracts at issue may involve gaming, and the legislative record makes clear that Congress felt strongly about that obligation:

KalshiEx LLC, vs. Mary Jo Flaherty, et al.

523KB ∙ PDF file

New Finance Institute (now Lexicon Labs) filed an amicus brief in the Court of Appeals for the Third Circuit in support of neither party.

In fact, the CFTC itself took its discretionary authority one step further and wrote Reg. 40.11(a), a prohibition clause; one it completely ignores today.

If Lothian looks at this picture and finds it impossible to reconcile, we agree. But the solution is not to interpret the statute in a way that denies the CFTC exclusive jurisdiction Congress granted to the Commission. The much better solution is acknowledging the fact that the regulator is simply acting inconsistent with congressional intent, and the legal mechanism that closes that gap is the APA.

Erosion of Definitional Integrity

Lothian dislikes that the swap definition has expanded to cover binary-outcome contracts. A couple quick points:

That’s what Congress ordered.
This shift predates Dodd-Frank. The real expansion happened in 2000 with the CFMA:

What Lothian really dislikes is not the expanded definition, but the fact that the CFTC is turning away from what Congress strongly expected them to do. That’s not a definition or preemption problem.
That’s a permissibility problem.

Lothian posted a recap, summarizing his prediction-market pieces. How he described the one we’re analyzing proves the point:

I walk through how the Commodity Exchange Act’s broad swap definition can technically catch these contracts, but I maintain that treating them as swaps obscures the crucial distinction between risk‑transfer instruments and gambling‑style wagers.

Yes, the definition catches these contracts. Treating them as swaps isn’t the problem. Treating them as permissible swaps is.

And by adding just that one word, the conclusion turns upside down. Prediction markets can’t offer these contracts–not because they aren’t swaps–but because they aren’t permissible swaps. And because of how Congress revised the CEA through Dodd-Frank, state-regulated sportsbooks cannot offer them either.

Prediction markets are top-of-mind for many people these days, including myself.

What’s different for me is that I started thinking about these issues long before prediction markets entered public consciousness. Before Kalshi and before Polymarket. Before ErisX and before Murphy.

How? How did I become that person?

It’s a long story, but the time has come to share it. Next up: How and why I wrote a 2013 Supreme Court petition. The question I asked:

Is sports performance an excluded commodity under the Commodity Exchange Act?

Thanks for reading Full Court Press! This post is public so feel free to share it.

We didn’t discuss it in this particular post, but the Wire Act is also implicated as part of the second inquiry (permissibility).

The Last Mile Problem In Legal Analysis

Alper Ozgit — Thu, 16 Apr 2026 22:16:56 GMT

There’s a recurring pattern in legal analysis. The framework is sound. The doctrine is applied correctly. The reasoning is careful and disciplined. And then—at the final step—the conclusion softens, hedges, or disappears entirely.

In other fields, this would be familiar. In supply chains, it’s called the “last mile problem”: Everything works smoothly until the final handoff, where delivery becomes the hardest part. Legal reasoning has its own version of that problem, and it shows up more often that people admit.

A recent post by John Lothian provides a clean example of this dynamic. His analysis is thoughtful, grounded and largely correct. But it stops just short of the conclusion the logic appears to require.

This isn’t unique to one commentator. Courts do it. Regulators do it. Entire areas of law are shaped by this tendency to follow the reasoning—right up until the answer becomes inconvenient.

John Lothian, Chicago-based journalist and entrepreneur, has been around the block (futures broker, trader, commodity trading advisor and electronic trading early adopter). Let’s hear from the Futures Industry Association, which inducted Lothian to its 2024 Hall of Fame:

As the founder in 2000 of the John Lothian Newsletter and publisher of John Lothian News (JLN), he pioneered blogging in the futures industry, where his newsletter has become a must-read among financial markets industry executives and professionals globally.

When Lothian talks, markets listen. And he did speak out this week on Monday, April 13th, offering his views on prediction market legality:

By John Lothian

It’s a strong piece, tracing the first-ever swap agreement, the evolution of the CEA, and the regulatory knots tied along the way.

Where we part ways is simple: Lothian, like many others, stops short of acknowledging that that the entire state-regulated sports betting regime may have been illegal off-exchange swap trading all along–a conclusion we’ve been pointing to for quite some time:

Lothian’s arguments deserve to be examined with the same rigor he applies to the CEA. In our follow-up post, we’ll break down his reasoning in detail. But today, I want to focus on something else: What Lothian may have felt when he followed the law to its logical end. He’s far from alone–many courts have confronted the same tension, including the Ninth Circuit Court of Appeals today, which is deserving of a post unto itself.

I understand the discomfort. You follow the statutes, carefully stitch the provisions together, and what emerges is… lawlessness. And not in some distant corner of the economy, but in the very industry you’ve spent your life inside. Non-enforcement is always troubling, but when it hits your own backyard, it lands differently. That realization must have been jarring for someone who lived and breathed futures markets and who, by all indications, believes deeply in the rule of law. So, Lothian pivots, concluding instead that sports event contracts are not swaps.

When a rigorous legal analysis leads to an intolerable truth, the conclusion often changes.

This is the same dynamic driving why states have been winning in district courts, by a wide margin. The sheer implausibility that states have been running illegal off-exchange swap markets for years has become a legal argument itself. Courts have a duty to follow the law, but they also recoil from outcomes that feel absurd. Many judges walked the same analytical path that Lothian walked, reached the same unsettling endpoint, and made the same pivot. Consider this passage from the Ohio opinion (PDF):

This conclusion is further supported by the Court’s obligation to avoid absurdity. Ohio argues that absurd results would flow from defining a “swap” to include a sports-event contract. The Court agrees. The CEA makes it “unlawful for any person . . . to enter into a swap” outside of a DCM. 7 U.S.C. § 2. Under Kalshi’s construction, a sports-event contract is a swap because it is a contract for payment based on the outcome of a sporting event. But if that is true, then all contracts for payment based on the outcome of a sporting event—all sports bets—would be forced onto DCMs like Kalshi and every sportsbook in the country would be put out of business. In the absence of congressional intent to effect such a sea change, that result is absurd. (emphasis added)

Absurdity, absurd, absurd–three mentions in one breath. The Court is wrestling with the same inconvenient endpoint. You can almost hear the internal deliberation: “Are you telling me that the states have been facilitating an illegal business? That can’t be right.”

It sounds absurd. I acknowledged that myself:

Maybe I have a higher tolerance gene for uncomfortable conclusions. Or, maybe I happen to be someone that looked at sports contracts with a critical eye and reached those conclusions before they became uncomfortable (I will share that story later in this series). Maybe it’s a combination.

Either way, I recognize that absurd results can follow, especially when enforcement responsibility sits with a single agency that may have been wary of the political fallout. Perhaps they thought: “SCOTUS hasn’t spoken on the CEA’s role in sports gambling, so why should we?”

But here’s the key: While some courts lean heavily on avoiding absurd results, others place less weight on that canon when it conflicts with statutory text. The Third Circuit offered a real-time example on April 6, 2026 when the majority ruled sports event contracts are swaps under the CFTC’s exclusive jurisdiction (opinion).

This is a good moment to remind our readers what happened during the oral argument stage (September 2025) in the Third Circuit (audio, PDF transcript):

MR. EHRLICH: I’d like to start with the Commodity Exchange Act’s definition of swaps, and quite simply, Your Honor, the Congress did not intend a massive sea change in gambling regulation when it inserted the word swap into the Commodities Exchange Act in 2010 as part of the Dodd-Frank reforms. The reason this is such a massive sea change is because swaps have to be traded on CFTC regulated exchanges on a designated contract market, and it’s, in fact, a federal crime to trade them outside of those scenarios, and so what we have here is a definition by Kalshi that would essentially make all casinos and sportsbooks currently federal felons…
JUDGE CHAGARES: So I -- it seems that that the definition of swaps is actually quite broad, and I understand you point out some things that seem undesirable to your side… Are we obliged to, to apply what the elected branches have gotten us here, and to the extent any fix is necessary, and we’re not saying it is, isn’t that for the elected branches to deal with and not us? (emphasis added)

The state’s position: “This can’t be right, the result is absurd.”
The judge’s response: “Even if it is, that’s Congress’s problem, not ours.”

It’s not that the court didn’t feel the same discomfort New Jersey raised. It’s that the Court weighed the competing principles differently.

One useful heuristic: Every court must follow the law, but the commitment to doing so–even when it leads somewhere uncomfortable–tends to intensify as you move up the judicial ladder. Judges who reach higher courts are hand selected, in part, because they are more willing to follow statutory text wherever it leads.

So let’s put this entire landscape into plain terms:

Lower courts tend to side with the states because absurdity and commercial disruption weigh heavily for them.

Appellate courts may side with prediction markets (one already has) because they are more willing to accept inconvenient truths.

SCOTUS is even more likely to follow the statutory analysis to its logical endpoint–especially once it becomes clear Congress intended exactly that.

In our next post, we’ll walk through Lothian’s reasoning step‑by‑step, examine where the analysis holds, where it breaks, and why so many smart people stop just short of the finish line. The last mile is always the hardest, and that’s exactly where the real clarity begins.

Thanks for reading Full Court Press! This post is public so feel free to share it.

The Outside-Lane Illusion

Alper Ozgit — Tue, 07 Apr 2026 13:02:40 GMT

We thought last week’s bombshell–the DOJ & CFTC suing three states, Arizona, Connecticut, and Illinois, over prediction markets–would be the natural place to begin this week’s post. But then an even bigger development landed: The long-awaited Third Circuit decision (PDF), a 2-1 split win for Kalshi that reshaped the landscape in an instant. Both stories matter, and both are connected, so before we unpack what the new ruling means, let’s briefly rewind to last week and pick up the thread of how we got here.

Notes From The Conference

The Indian Gaming Conference took place last week in San Diego. I wasn’t there, but prediction markets were everywhere–with Monday being exclusively dedicated to the topic, and the rest of the week was peppered with related sessions.

The headline? Money is pouring into the prediction-market litigation war chest:

There was even chatter about sports betting returning to the California ballot in 2028:

The overall tone was unmistakable: A rallying cry for the tribes:

But, will it succeed?

The Outside-Lane Illusion

In the late ‘90s, after shedding the baby fat that overstayed its welcome, I joined my college track & field team. Sprinting wasn’t my cup of tea–genetics made sure of that. I had stamina, but not speed. At 6’2’’ weighing in the 180s, I wasn’t built like a featherweight distance runner either. My sweet spot became the 1500m: Long enough to hide my lack of explosiveness, short enough to keep my frame from becoming a liability.

One Saturday, the middle-distance group gathered for a 400m time trial. I’d never raced a 400 before. I’d heard about “the wall,” but never met it personally.

The coach put me in the outside lane and said, “Let them chase you.”

I took off like a rocket. I crossed the 200m in ~27 seconds–fast for me–and I was “leading.” Or so I thought.

Then the curve ended.

The other three runners were all of a sudden ahead of me.

I hadn’t lost the lead.
I never had it.

The outside lane had fooled me. It does that. It gives you the illusion of being ahead and then reality hits. I knew that, but in the heat of the moment, I was fooled anyway.

And then came the wall.
The last 100 meters felt like 100 days. The others cruised to personal bests. I practically walked across the line.

A fake lead. A brutal wall.
A lesson I’ve never forgotten.

And that lesson is playing out again–this time in prediction-market litigation.

Is The States’ Lead Real?

As of April 1, 2026, the scoreboard reflected a comfortable 13-21 lead for the states:

But our last post’s subtitle said it plainly: Why the states’ lead in prediction market litigation seems fragile:

Some leads are illusions, like an outside-lane mirage.
Some leads are real but brittle.

Nathan Martin catching Kenya’s Michael Kimani in the closest finish in race history? Kimani’s lead was real. Mine wasn’t.

So what about the state’s lead?
Are they actually ahead?
Or are the federal district-court and state-court skirmishes just noisy outside lanes masking the true race?

Last week on LinkedIn I wrote:

The scoreboard may not reflect it yet, but Team Prediction Markets is playing well.

And now, after the past 72 hours, that statement has aged like a fine wine.

Federal vs. State: A Plot Twist

The DOJ/CFTC lawsuit against three states was a plot twist no one saw coming:

The DOJ once sent Jay Cohen to prison over the Wire Act for offering “sports futures.”
Now it’s suing states so “sports futures” can succeed.

The CFTC once gave ErisX no choice but to withdraw their sports event contracts.
Now it’s suing states so sports event contracts can succeed.

The law hasn’t changed.
The Wire Act is still there.
The CEA is still there.
It’s the federal government’s position that has changed.

And just as that shockwave was settling in, the Third Circuit dropped its long-awaited decision.

The Third Circuit Decision

A 2-1 split win for Kalshi.

Not shocking to me–I wrote just last week that a shutout was unlikely and that a 2-1 for Kalshi would shake the Jenga tower.

The Third Circuit decision is imminent. A shutout seems rather unlikely.... A 2-1 split win for Kalshi would shake the Jenga tower. A 2-1 for New Jersey would make the tower even more sturdy… for now.

Well, the tower certainly shook.

But here’s the twist:
The correct legal interpretation isn’t fully in the majority opinion.
And it isn’t fully in the dissent either.

The best reading of the statute is stitched together–majority on some issues, dissent on others. That’s both unusual and telling. We will follow-up with a full analysis in another post.

Walking Into a Trap

Warren Buffett once quoted a saying in poker:

“If you’ve been in the game 30 minutes and you don’t know who the patsy is, you’re the patsy.”

Patsy. Fool. Same idea.

And speaking of fools, Arizona dropped this gem a week before April Fool’s Day, fittingly:

Certainly the Supreme Court isn’t composed of fools.
But one can argue that someone in this litigation is acting like one.

The Chicago Lesson: Not Looking Back

I’ve lived in three major cities: Istanbul, LA (twice) and Chicago.

We started with a running story from Istanbul.
We added another one from the LA Marathon.
So let’s finish with Chicago by watching Adriana Pirtea’s heartbreaking finish:

Adriana Pirtea had passed the reigning champion, Berhane Adere, and never looked back.

She celebrated early, assuming the race was already won.
She was high-fiving spectators.
She was waving.

Little did she know, Adere began sprinting.
Pirtea didn’t know.
She didn’t want to know.
In her mind she had already won the race.

Pirtea was the patsy and she lost the race she should have won.
Confidence is powerful–when you manage the downside.
Ignoring the downside isn’t confidence.
It’s foolishness.

Are The States Celebrating Too Early?

I’ve been critical of the states’ litigation strategy for a long time. Not because I don’t understand it–I do. I just don’t believe they’re playing their best card:

Rob Schwartz sees the tension.
Andrew Kim calls it a trap.
Paul Grewal publicly puts the odds at 90% (prediction markets prevailing on jurisdiction)
When the CLO of Coinbase is that confident,–maybe, just maybe–you should look back before you round the corner.

The DOJ/CFTC suit was the first warning sign.
The Third Circuit decision is another.

This could get ugly for states and tribes real fast.

Co-Existence Is a Myth

There will never be parallel federal sports gambling and state-regulated sports gambling in this country.

The Third Circuit tucked that issue into a footnote in the opinion (PDF):

We need not address the parties’ extra-textual arguments related to whether the Act preempts all state gambling regulation, because Kalshi does not argue that the Act preempts all state gambling regulation.

The Supreme Court won’t.
And even if it does, the prediction markets won’t.

Here’s what happens the moment prediction markets win on preemption:

They sue the states and tribes arguing that state-regulated sports gambling is illegal off-exchange swap trading (Quintenz has already said as much).
States will cry foul, accusing Kalshi of conducting an about face, pointing to that footnote in the opinion and arguing how Kalshi put the parallelism issue aside only to backtrack it.

None of it will matter.

Courts will read the statute and conclude–comfortably–that there is no room for state-regulated sports gambling.

This isn’t the Chicago Marathon.
There are no prizes for second place.

If the feds cross the finish line first, the states and tribes may lose everything.

Thanks for reading Full Court Press! This post is public so feel free to share it.

With the Nevada decision last Friday, the latest score is 14-2.

Judge Gordon's Jenga

Alper Ozgit — Wed, 01 Apr 2026 13:02:11 GMT

The prediction market industry is getting a ton of coverage these days, so let’s begin with a quick who’s who.

Tarek Mansour is the natural starting point. As CEO of Kalshi–valued at $22B in the latest round–he has the ear of nearly everyone. He is widely followed and what he says quickly becomes part of the news cycle.

Shayne Coplan, CEO of Kalshi’s archrival Polymarket, just inked an MLB deal. Polymarket is still mostly international, but their U.S. footprint is growing in size, so we’ll certainly hear more from him.

A number of attorneys are also shaping this conversation. Daniel Wallach, a vocal states’ rights advocate, recently appeared in the PBS documentary titled Breaking the Deadlock: Gambling With Your Life. Andrew Kim has been quieter lately but remains a frequent commenter. Rob Schwartz, former CFTC General Counsel, litigated the Kalshi election contracts matter and is now a partner at Morgan Lewis–recently published a short prediction market piece (PDF) in Futures & Derivatives Law Report. Each brings a distinctive lens.

Journalists are on the beat as well. Nick Devor at Barron’s has been excellent, especially his coverage of the CFTC’s Chicago enforcement team. His recent Q&A with Paul Grewal is a must-read (we posted a follow-up on Monday). Ben Horney at Front Office Sports broke the MLB news. Dustin Gouker, posting at Event Horizon and The Closing Line, was early to this space and brings the advantage of having covered DFS extensively a decade ago.

Last but not least, politicians are now showing up to the party. Gavin Newsom issued a press release and an executive order (PDF) last week. AOC has chimed in and so has DeSantis.

And, this one is hot off the press:

And the accompanying press release.

Love her or hate her, when Elizabeth Warren enters a conversation, she amplifies it. More broadly, politicians arriving in droves could be a precursor of what’s coming. Are prediction markets about to become the next big campaign issue? (Listen to our latest quick-hit podcast)

A natural question has emerged: Who is the most influential person in the prediction market industry right now? If you were putting someone on the cover of a magazine, who would it be and why?

We’ll stick our necks out with an unlikely candidate:

Judge Gordon.

The States Are Leading Big Time–Most of It Traces Back to Judge Gordon

It’s the end of the month, and the end of the quarter, so here’s the updated scoreboard:

Yes, the states are crushing it. We’re running out of space on the left-hand side.

But if you trace the story back to the beginning, one figure sits at the center of nearly every major outcome: Judge Gordon, the judge who handed the first sports event contract victory to…

Kalshi.

As Alanis Morissette would say: Isn’t it ironic? Don’t you think? How can the same federal judge rule in favor of a prediction market early on, yet become the most influential force behind the states’ winning streak?

This is how:

Nevada, the mecca of sports betting, sent a C&D letter to Kalshi on March 4, 2025. Kalshi did not comply. Instead, they used the letter as fuel to sue the state in federal court. Judge Gordon granted Kalshi a preliminary injunction (PDF) on April 9, 2025 and they lived to fight another day in Nevada.

That opinion likely influenced what came next: another Kalshi win, this time in New Jersey. Judge Kiel cited (PDF) Judge Gordon’s opinion, six times. That was entirely expected; the cases were nearly identical.

Then came Maryland. It felt like the drive that would either make the game 7-14 (back in it) or 0-21 (game slipping away). The latter wouldn’t have been insurmountable, it was still very much mid-first quarter, but momentum matters. Anticipation matters. Perceived defeat often changes behavior long before actual defeat arrives.

Maryland became the turning point. Judge Abelson ruled for the state (PDF). Some immediately called it the first step toward a SCOTUS showdown (including us). We agreed with the trajectory, though not with Judge Abelson’s preemption analysis; on that front, we believed Kalshi had the advantage. Still, the wheels were in motion.

Then things became even more interesting. The Third Circuit appeal (stemming from New Jersey) was already underway, with oral argument (audio, transcript) held on September 10, 2025. Meanwhile, another nearly identical lawsuit had landed on Judge Gordon’s desk.

He looked at it with fresh eyes and… reversed himself.

Everything began to unravel from there.

Judge Gordon’s Reversal Sets The Tone

In Nadex v. Nevada 1 (PDF), Judge Gordon wrote:

Despite my prior ruling in Hendrick, I reach a different conclusion in this case.

It was the second loss for prediction markets–and the first for Nadex. The scoreboard moved to 2-2, which wasn’t unusual. What was unusual was the same judge sat on both sides of the scoreboard.

Nevada seized the moment, asking him to dissolve Kalshi’s preliminary injunction (PDF), while also citing the Maryland decision.

Unsurprisingly, Judge Gordon did just that (PDF)—a couple of days before Thanksgiving. For good measure, he added another state win (against Robinhood) the next day. The Robinhood decision (PDF) cited both Hendrick (the Kalshi PI dissolution) and Nadex.

Just like that, the states took a commanding lead. The scoreboard read 4-1, with three of those wins originating from the same judge.

We were not convinced. Many of the arguments in those decisions seemed unlikely to hold up on appeal.

We were not alone. Andrew Kim called Judge Gordon’s Nadex position “not solid legal reasoning” and suggested he may be “setting up himself for reversal.”2

But other federal judges didn’t necessarily see it that way. Kalshi scored in Tennessee but lost several more. As of March 11, 2026, the scoreboard was 9-2. As of March 31, 2026, it’s 13-2.

States appear to be winning and Judge Gordon is the gravitational center of that momentum.

He built a tower that looks sturdy at first glance.

Will it hold? Or will it topple?

Incentives In Disguise

There is an idealized version of the world in which decisions are made on the merits. You pick friends because you genuinely enjoy their presence, not because others like them. You hire based on quality, not popularity. You invest based on value, not because other fund managers like the company.

I clung to that view far too long, and deep down, I haven’t completely given up hope that we might get there one day, or at least make strides toward it. That’s how I think the world should work. Infamously, and we all know this, that is not how the world actually works.

What I described can perhaps be characterized as peer pressure, but I think that’s too lazy of a conclusion. What we call peer pressure is often just incentives in disguise.

Back when I was on the job market coming out of the Ph.D. program, I had applied to a big-name firm. I didn’t receive a call back. I figured my resume didn’t make the cut so I moved on. A few months later, an acquaintance encouraged me to apply. It didn’t make sense to me. “I had already applied and didn’t receive a call back,” I told him. My resume didn’t change, so why would the outcome? He looked at me funny and said, “Trust me.” I re-applied and got the interview.

At the time, I didn’t understand it. Did the company like me or not? Why did they reach opposite conclusions, a few months apart, with the same resume?

Years later, reviewing hundreds of resumes for PwC, I finally understood what happened and why. When you’re buried under volume, you start looking for quick signals. You feel like you have to. There isn’t enough time to deeply evaluate everyone, so you rely on shortcuts. Someone else’s prior validation becomes a filter.

The outcome was different the second time because there was a new signal; my application was delivered through a person one of the recruiters trusted. What I thought was the exact same application wasn’t so, it was delivered differently, and therefore, it was received differently. The episode wasn’t about inconsistency. It was about efficiency–a way to allocate limited time and attention in a world overflowing with noise.

And the irony is that a very similar dynamic exists in the industry designed to make the world more just.

When it comes to incentives in disguise, law is no exception.

The Power of Precedent

Judges often operate under the same constraints as the rest of us. The docket must move. There are more cases than time. Shortcuts are inevitable.

Precedent becomes the shortcut.

This is not a slight on the judiciary–it’s reality. Even judges without preconceived outcomes (a common critique) must make high-stakes decisions quickly, often without full visibility into the broader historical context.

So they look to precedent.

To be fair, precedent can be powerful. It can bring in consistency, stability and predictability.

At the same time, it can be misleading. Weak arguments can survive for years simply because no one has the time or incentive to challenge them until a better case comes along. SCOTUS only takes about 2% of cases presented to them. The rest settle into the legal landscape–right or wrong.`

Back to prediction markets: When Judge Gordon ruled for the state and against Nadex, Kalshi, and Robinhood, he provided the building blocks for every other courtroom.

His tower became the template.

Judge Gordon’s Jenga Tower

What Paul Grewal Gets Right About Prediction Markets—and What Comes Next

Alper Ozgit — Mon, 30 Mar 2026 22:11:46 GMT

Thoughtful Q&A by Nick Devor with Paul Grewal raises exactly the right questions about jurisdiction and the future of prediction markets. Grewal’s answers follow a familiar, and revealing, pattern: Confidence on preemption, caution on permissibility and calibration on parallelism.

That structure is not incidental. It reflects where Coinbase’s chief legal strategist knows he is strongest, where he knows he is weakest and where he is playing the long game.

Let’s break it down:

Grewal’s Confidence On Preemption

Grewal oozes confidence on preemption, and for good reason. Yes, the scoreboard today appears lopsided in favor of the states (Currently 13-21):

But, Grewal doesn’t seem bothered—and his confidence is not misplaced.

He knows the law is on his side, and it’s not a close call.

The states’ Achilles’ heel has always been the same: Their theory has no limiting principle, and courts generally do not endorse positions that have no logical stopping point. For a while, states tried to keep the fight contained to sports. That doesn’t mean they would be able to produce a coherent answer when they face the more difficult question: If you can regulate sports event contracts, can you also regulate election contracts?

A natural tension emerges here. Once a state asserts authority over one category of federally regulated event contracts, it becomes more difficult to articulate why that authority wouldn’t extend to others. Even if a state wanted to draw a boundary, it’s not obvious where that boundary would come from or how it would be justified under the structure of the Commodity Exchange Act. That uncertainty is what keeps the limiting principle problem alive.

That uncertainty could, in theory, hide behind a shield if the states only challenged sports event contracts. They aren’t, so that rhetorical shield is now gone.

Nevada’s recent state-court ruling (PDF) against Coinbase reaches elections. Kalshi was criminally charged in Arizona two weeks ago, and four of the counts are related to election contracts. Minnesota’s bill lumps elections together with sports and other commodities.

The states are no longer cabining anything–they’re reaching for everything. As Grewal himself put it, “... they want it all.”

When states claim jurisdiction over sports, elections and whatever else they can grab, they recreate the exact regulatory chaos Congress worked so hard to prevent with the 1974 Commodity Futures Trading Commission Act. They’re trying to reinvent the wheel that Congress already fixed decades ago.

Grewal knows this and knows how these stories end.

The scoreboard may not reflect it yet, but the momentum has shifted. This feels like one of those games where the team in the lead is beginning to lose control–and everyone watching can feel the start of the comeback (If you remember the Falcons vs. Patriots Super Bowl you know what I mean).

Grewal’s Caution On Permissibility

“Not every silence is pregnant,” the Supreme Court once said (quoting another case).
But this one is.

Grewal knows his strongest argument is preemption.
He also knows his weakest argument is permissibility.

So when Barron’s asks the most obvious question:

Prediction markets ask users to put money on the likelihood of future outcomes. Is that not gambling?

Grewal disregards the gambling notion and immediately pivots back to preemption. His first sentence:

Prediction markets are a type of derivative contract and derivatives have been regulated by the federal government going on many, many decades now.

I don’t believe anyone can disagree with that response because it’s the truth. His last sentence reinforces his position:

[T]he words of the CEA are very clear: Event contracts of all types, including those related to sports, are derivatives, and therefore not subject to state gaming laws.

Both sentences are true. Both are also safe. Sandwiched between those two bookends he offers a historical aside about how “gambling” has been used to describe futures contracts for a century:

“Gambling” is a term that has been used to characterize certain futures contracts going back to the origins of the CEA. For example, labeling futures contracts on grain as gambling. So while we certainly understand there is a common regular usage of the term in everyday conversation, in the law, words matter.

This is also true and safe.

But notice what he does not do:

He does not address what “gaming” means under the CEA. He does point out (correctly) that this is the CFTC’s call to make, but doesn’t truly elaborate on what he thinks the call should be.
He does not reveal the fact that the only appellate court that has recently analyzed the statute through a gambling/public interest lens, the Court of Appeals for the D.C. Circuit, seemed poised to conclude that “gaming” may be problematic for elections–let alone sports.

We recounted that story in a previous post:

The bottom line is simple and Grewal probably senses this too:

The position that sports event contracts are not “gaming” under the CEA is not tenable.

Grewal’s Calibration On Parallelism

When asked what role the states can play, Grewal offered a carefully balanced answer:

The states have an important and ongoing role in regulating gaming writ large. If there is gaming activity outside of CFTC-regulated markets that don’t involve these event contracts, the states absolutely should play a role in overseeing that activity. But when there’s a contract sitting on a CFTC-regulated market, states have no business under the law set by Congress in attempting to restrict it. And where that happens, I think it clearly is an overreach.

This is the standard prediction-market position:

States can regulate sports gambling within their borders, but they cannot reach into CFTC-regulated markets.

The problem?
That’s not the law.

If sports event contracts are swaps, they can only trade on CFTC-regulated exchanges. Multiple courts have said so. A former CFTC Commissioner said the same thing:

Because that’s not the law, prediction markets will inevitably challenge state-regulated sports betting the moment they secure a preemption win:

Prediction markets are playing the long game.
There’s no reason to try to consolidate power now.
Preemption first.
Off-exchange swap trading later.

And states, for the most part, are letting prediction markets dictate the rules.

Why We’re Here: Litigation Sequencing

Whether intentional or not, prediction-market litigation is unfolding in a way that should make Grewal smile. Preemption–their strongest argument–is the only issue courts are seriously engaging with right now. And, to date at least, the states have taken a commanding lead on that front. That said, much of that is just noise.

Grewal can afford to ignore the noise.

The real question is why preemption is the only live issue. We answered that question in a four-part series on litigation sequencing, and if you read it, we are confident that you’ll find at least one idea you haven’t seen anywhere else:

Predictions: Grewal vs. Lexicon

Devor asked Grewal the right question:

What are the odds that they rule in favor of prediction markets?

Grewal didn’t answer that question.
He answered a different one (jurisdiction):

They will rule in favor of the CFTC’s exclusive jurisdiction over prediction markets. I have no doubt in my mind about that.

That’s the key phrase: CFTC’s exclusive jurisdiction.
On that point, he’s right and we agree.

But here’s what’s really happening:

Prediction markets are framing this entire fight as a preemption debate.
They’ll continue to avoid, defer and dodge every question about permissibility.

Because they know what’s at stake:

If SCOTUS takes only the preemption question, then prediction markets win; but
If SCOTUS considers the rest, things may not go so well for them. Even if prediction markets win on preemption, they may lose the battle over whether they have a right to exist.

So, for clarity, let’s separate SCOTUS ultimately taking the case from the questions they will tackle if they take the case.

Grewal makes a conservative estimate when asked about the former, stating “the odds are better than 50/50 that the Supreme Court ultimately weighs in.” It’s not clear whether he truly believes that or downplays its significance. We assigned a much higher probability to SCOTUS eventually taking the case than Grewal:

But the second question in the graph above (middle) is the more consequential one. Grewal predicts there is a better than 90% chance that SCOTUS affirms the CFTC’s exclusive jurisdiction. That probability is a conditional one and shouldn’t be viewed as the same estimate as a favorable SCOTUS outcome for prediction markets: It assumes the Court will frame the case around the narrower preemption question. Our prediction is that SCOTUS is unlikely to confine itself to that framing. In other words, the issues currently being litigated in lower courts may not be the full set of questions the Supreme Court ultimately chooses to resolve.

Here are the rest of our predictions and our reasons:

In closing, what do you think will happen? Will it boil down to Grewal’s “nothing-to-see-here” vibes and prediction markets win on preemption or do you assign higher odds, like we did, that SCOTUS will not take the narrower path?

Thanks for reading Full Court Press! This post is public so feel free to share it.

In a quick exchange, Wallach clarified that he is also counting the Coinbase TRO as a win for the states. That ruling came in early February, and the related PI decision is what was issued on March 26, 2026. See Exhibit A (PDF).

Either Mansour Misunderstands Sports Betting or Bloomberg Misunderstands Mansour

Alper Ozgit — Thu, 26 Mar 2026 13:03:18 GMT

The media interest in prediction markets is growing by the minute. That’s not surprising: Lawsuits are piling up, Kalshi was forced to leave Nevada, Arizona filed criminal charges (our podcast coverage), congressional bills are flying around and even AOC has now chimed in:

Despite the chaos, or perhaps because of it, Kalshi has managed to raise another $1 billion at a whopping $22 billion valuation.

No wonder, then, Bloomberg Businessweek’s March issue made prediction markets its cover story.

It’s a solid read, but today we’re focusing on one specific piece of it: Mansour’s supposed distinction between “artificial risk” and “natural risk,” and Bloomberg’s claim that this is what separates Kalshi from sportsbooks.

If this is truly Mansour’s position, it’s one of his most incoherent yet.

Alternatively, Bloomberg may simply be muddying the waters even more–likely unintentionally, but the result is the same.

Could this be the blunder that erases a $22 billion valuation overnight?

Concerned For This Country: A Response to Aaron Brogan

Alper Ozgit — Mon, 23 Mar 2026 20:00:06 GMT

Aaron Brogan put out a piece a couple of weeks ago titled What’s Going to Happen to Prediction Markets? The subtitle: Why are so many people so concerned about fairness in niche financial products?

We are concerned, because we are strong believers in enforcement. If the laws stop being enforced on a massive scale and multi-billion-dollar industries can be created not because the products are innovative but because the legal maneuvering is, that’s the beginning of the end for a country. Before you dismiss us for being extra-alarmist, let us be clear. Yes, these are long cycles. America is not going down this year or the next or the year after because of prediction markets. At the same time, what is happening is clear if you look closely: Instead of cementing its lead on financial innovation, America chooses vice under the guise of innovation. Laws are applied unevenly, or not enforced at all. From the Roman Republic to the Ottoman Empire, history tells us these episodes don’t end well.

With that framing, let’s turn to Brogan’s position. His central claim is this:

There is a panel of nine judges in Washington D.C. that is going to eventually determine whether prediction markets based on sports and entertainment are legal, and preempt state enforcement, or are illegal and do not, and every single other decision between now and the day that the Supreme Court does eventually rule is just noise. Plain and simple.

There is a lot going on in this single paragraph; much more than it appears at first glance. We have blog pieces and podcasts on the critical issues hiding underneath, but let’s start with the key framing:

Is this the choice: Federal & legal vs. illegal under state law? No, that’s a false binary.

The False Binary - Ep. 17

Key Takeaways…

5 months ago · 1 like · Lexicon Labs and Alper Ozgit

Brogan sees one of the three Ps: Preemption. He sees that not because it’s the only question that matters, but because litigation sequencing forces that issue to the front:

The real question is more broad.

Is the Law Really Clear?

Brogan believes “the law is so clear.” In a footnote, he clarifies:

And by clear here, I mean that the core issue is already well known and there is little question that the Supreme Court is the only authority that can ultimately decide it.

Again, yes–SCOTUS will ultimately decide it, but what they decide matters most. Deciding a preemption question is very different from deciding the legality of sports gambling. Brogan seems to assume SCOTUS will only address the former, but the fact that preemption is what’s being litigated now does not mean that that is the only question the Court will consider.

So is the law clear? We agree it is, but only if you take a holistic approach and view the debate through The Lexicon Lens:

Our summary: The 3P framework is what matters most: Preemption, permissibility, and parallelism. On those three fronts, our conclusions are:

→ Federal law preempts state gambling laws.
→ Sports event contracts violate the law1:

They are impermissible under the CEA because of the “gaming” prong
They also face an additional hurdle because they are illegal under the Wire Act

→ State-regulated sportsbooks are offering illegal off-exchange swap trading.

We have no doubt whatsoever that this is the law. The real question is what happens when SCOTUS confronts it.

Will SCOTUS Fully Resolve the Issue?

Brogan’s view leans toward legal realism:

Here is what actually matters. Money. Power. That is the key to understanding this fight.

He seems to believe the highest court will not upend an entire industry, he said as much before. I’m not so sure. The Justices have their own reputations to consider. They are justices for life. They cannot think too much about this administration or the next or the one after. Confidence in the Court is at a record low and I cannot imagine that is irrelevant to them. One Justice who is seen as “deeply committed to rule-of-law principles” has publicly stated that she views her duty as to “follow the law wherever it may take [her].” I’m fairly certain that most, if not all, of the Justices subscribe to the same view.

So when SCOTUS takes the case, I believe that they will be inclined to resolve the entire framework–not just the narrow preemption issue.

Murphy didn’t really solve much. I have always believed it was one of the more inconsequential cases decided. On that note, Brogan’s characterization of Murphy is misplaced.

What Murphy Did and Didn’t Do

Brogan writes:

Historically, state gambling was illegal. But on May 14, 2018, the Supreme Court’s decision in Murphy v. National Collegiate Athletic Association, 584 U.S. 453 (2018) legalized state sports gambling in the United States. It turned out that the law PASPA—the Professional and Amateur Sports Protection Act of 1992 that the federal government previously used to prohibit states from legalizing gambling actually violated the anti-commandeering doctrine of the Tenth Amendment. This created an important source of state-controlled revenue, and created a new locus of power in state regulators by locally empowering them to oversee substantial gambling markets.

Well, SCOTUS obviously didn’t “legalize state sports gambling in the United States,” but we know what Brogan means, so we’ll give him a pass.

This excerpt, however, is correct:

It turned out that the law PASPA—the Professional and Amateur Sports Protection Act of 1992 that the federal government previously used to prohibit states from legalizing gambling actually violated the anti-commandeering doctrine of the Tenth Amendment.

Right. That violation is precisely what SCOTUS concluded—nothing more, nothing less.

What Murphy didn’t do is just as important. It did not decide whether sports gambling is lawful under federal law. It did not address the CEA, the Wire Act, nor did it evaluate the permissibility of sports event contracts under either statute. It did not pave the way for states to legalize sports betting. Murphy struck down PASPA because the Supreme Court held that it violated the anti-commandeering doctrine–and left every other constraint exactly where it was.

There were two doors that looked identical but opened into completely different rooms: PASPA (violated the anti-commandeering doctrine) and the CEA (it reached sports but SCOTUS remained silent on that issue). Those two doors collapsed onto each other and somehow states were able to walk through. The CFTC did nothing and here we are. We dug into this as well:

The industry cannot have it both ways.

If federal law preempts state law today, then it did so in 2018 as well–and state-regulated sports gambling was (and continues to be) illegal under the CEA.

Or, it doesn’t preempt, and prediction markets may be criminal under the laws of states like Arizona (and why companies like Kalshi are now facing criminal charges within the state).

Which one is it? Well, we provided the long answer in our latest podcast:

The Arizona Divide - Ep. 19

📌 Key Takeaways in Arizona vs. Kalshi…

4 months ago · Alper Ozgit and Lexicon Labs

The short answer: State law isn’t the problem-federal law is.

Let’s Predict

Brogan’s prediction:

My best prediction is that entertainment and sports prediction markets have a 70% chance of surviving. That assumes that the forthcoming CFTC NPRM on prediction markets liberalizes the treatment of these markets, and that the question of preemption eventually accedes to the Supreme Court. Once it gets there, all that counts, through all the sound and fury, is counting to five.

Right, under his assumption, Brogan is probably correct.

Where I differ is not whether SCOTUS will take the case–they will.
Nor is it whether prediction markets win on preemption–if that’s the question, prediction markets win.

My disagreement is about what question SCOTUS will take.
My prediction is that they will look at everything together, not just the narrow preemption issue.

And if that’s what they do, here is how we believe it will shake out:

We’ll leave it there for this week. The law is clearer than the industry wants to admit, and the sequencing is already in motion. The next stop is coming–and we’ll be here to walk you through it.

Thanks for reading Full Court Press! This post is public so feel free to share it.

Many other event contracts, like mention markets are also impermissible but sports event contracts are the most consequential, and potentially the only ones SCOTUS will evaluate.

Litigation Sequencing — Stop #3: Parallelism

Alper Ozgit — Thu, 12 Mar 2026 22:18:37 GMT

We didn’t want our litigation sequencing series to end, but like all good things, this too, must come to an end. So let’s make it count.

On Monday, I introduced the idea of litigation sequencing–the observation that in complex regulatory disputes, the most important question is often not who is right, but which question gets answered first. On Tuesday, we covered Stop #1: Permissibility. The train has already left that station. Yesterday, we covered Stop #2: Preemption. The train is still idling on the tracks, and at this pace, it may sit there for a while–at least until SCOTUS intervenes, that is.

But today, we will play Nostradamus.
If you could see the different futures ahead, what would you do differently now?

Especially if you are in the states’ shoes.

Let us speculate on some alternative futures…

Stop #3: Parallelism

The final stop on the route is Stop #3: Parallelism.

One idea is that federal and state regimes can peacefully co-exist; the utopia where sports event contracts and state sports betting models run side by side. For many, that’s the happily-ever-after scenario.

Is that even realistic? Michael Selig believes so.

It’s true that federal law allows some state action to coexist with federal oversight. But the law does not allow parallel trading of swaps on-exchange and off-exchange.

That’s black letter Dodd-Frank, the very reason the statute exists:

Still, let’s imagine that somehow we still arrive there. Perhaps SCOTUS rules that federal law preempts state gambling law. In that scenario, the train will have reached its final destination:

Are we there yet? No.
Could we plausibly get there? Yes.
Could the train stay there? Momentarily, yes. Permanently? Unlikely.

Gazing Into Our Crystal Ball

Our point isn’t whether this issue ends up at SCOTUS, we already believe there’s a 90% chance or higher that it does. Nor is it that SCOTUS won’t rule on federal preemption. I personally think that is quite likely. Chad thinks it’s a little less likely.

But here’s what I have zero confidence in:
Even if we get there, I don’t believe we will stay there.

Economists learn early that everything is about incentives. Once you look at the incentives prediction markets will have, the next steps become obvious:

A prediction market sues state-regulated sportsbooks, arguing they are engaged in illegal off-exchange swap trading.
The CFTC files an amicus brief supporting that position–because it expands the agency’s power;
The courts agree, because the statute is clear; and
State-regulated sports gambling collapses, replaced by a federally regulated, national regime.
States, tribes, state-regulated sportsbooks and their investors should be pricing this in, but most don’t seem to be doing so.
Prediction markets are not trying to coexist. They are isolating the fight to preemption because that is where their strongest arguments lie. Once they win on that front, their coexistence argument disappears; it will have served its purpose and will no longer be needed.

And if you are the states, there’s only one way to stop it.

Revisiting the “What If” Scenario

Remember, there are two ways to litigate permissibility:

Approach #1 (broader): Argue for public interest
Approach #2 (narrower): Zoom in on “gaming”

In our Stop#1 post, we observed:

For decades, the CFTC relied on Approach #1.

…until it abandoned its playbook for an intermediate approach that we labeled Approach #1.5.

We then asked a hypothetical:

What if the CFTC adopted Approach #1 [in Kalshi litigation]?

Our answer:

The CFTC [might] have lost the battle but won the war–and the American public would have won with them.

Let us continue with the train route imagery powering this entire litigation sequencing series:

In this reality (the top route):

Election markets might have stayed;
Frivolous contracts like mention markets would not exist;
Sports event contracts would never have been permitted;1 and
There would be no Stop #2 or Stop #3. State-regulated sports gambling would have continued uninterrupted.

Not because preemption disappears, not because off-exchange prohibitions vanish, but because litigation sequencing never begins.

Preemption and parallelism would have remained academic inquiries. I even raised preemption in an amicus brief (PDF) during Murphy, arguing sports bets function as futures contracts and are governed under the CEA, meaning the CFTC has exclusive jurisdiction. SCOTUS declined to engage.

Had the CFTC stayed on track, the train never would have left Stop #1.

Obviously, that’s not what happened. The CFTC opted for Approach #1.5, which cracked open the equilibrium. It shifted us into this alternate world where:

Frivolous markets abound;
Sports gambling organizes daily life; and
The people who control sports gambling are powerful.

We’ve seen this movie before. Literally.

We Live in An Alternate Legal Reality

In Back To The Future 2, one moment in the past rewrites the entire timeline. In prediction markets, that moment was when the CFTC abandoned its playbook and discarded public interest.

Marty McFly slams the table in anger:

The son of a bitch stole my idea. He must have been listening, when I…

…and immediately realizes that he was the reason for this mess.

It’s my fault. The whole thing is my fault. If I hadn’t bought that damn book, none of this would have ever happened.

Had the states not advanced the “book,” none of this would have ever happened. The states gave prediction markets an idea–and they ran with it.

So now the states face a decisive choice:

Become the angry version of Marty McFly and keep fighting the preemption battle; or
Become the restorative force, acknowledge their role in creating this mess and forge a winning path that gets this train back on the right path.

The States’ Strategic Dilemma

We briefly talked through the states’ choice here, let’s recap:

Option A: Fight Jurisdiction (the current route)

Argument: States regulate gambling; federal law cannot preempt state sports betting regimes.
Upside: If they win, the state model and only the state model, survives.
Downside: If they lose, the litigation sequence continues:

Permissibility ✔
↓
Jurisdiction ✖
↓
Off-exchange enforcement

At that point, sportsbooks start to look like illegal off-exchange swap markets.
That’s the catastrophic outcome.

Option B — Reopen Permissibility

Argument: Sports event contracts should never have been permitted under the Commodity Exchange Act.
Upside: The sequence collapses immediately.
Downside: States implicitly concede that sports wagering markets resemble derivatives markets–undermining their own sportsbooks.

That’s the choice.

The Crescent Tactic Trap for the States

Growing up in Turkey, we learned about the crescent tactic (hilal taktiği):
A feigned retreat draws the enemy forward until the wings close around them.

The coexistence narrative works the same way.
It lures the states deeper into the jurisdictional fight.
If they lose there, the sequence advances to off-exchange enforcement–the point where the legal structure closes around the state-regulated sports betting model.

The sequence appears linear.
But if it reaches the off-exchange stage, it becomes a crescent.

This is a trap in the making.

The States Still Control Their Own Destiny

There is a world where SCOTUS sees through this litigation sequencing and addresses the 3P Framework in its entirety. In that world, SCOTUS may shut down the route entirely (the entire sports gambling industry).

You can’t hope for that outcome.
The states must manufacture it.

The best way to predict the future is to create it.

If states keep fighting preemption, they might win.
But they might also end up with the crumbs of a national sports gambling pie.

A better strategic choice exists.

Rewriting the Sequence

The states don’t have to ride the sequence to the final stop.
They can reroute back to Stop #1.

Yes, reopening permissibility puts their own sports betting regimes under uncomfortable scrutiny.
But by focusing exclusively on jurisdiction exposes them to a far greater risk:
Losing not just the case, but the entire sports betting model.

Going “back to the future” where prediction market sports betting dominates solves nothing.
The states must go back to the past and fix the problem at its origin.

Just like Marty McFly.

Embracing The Past

States often argue they have historically regulated gambling.
Casino gambling? Yes.
Sports gambling? Name a state–east, west, north, or south of Nevada–that regulated sports gambling before May of 2018.

As Charles Fain Lehman reminds us, it is easy to forget:

Everyone forgets how recent the new vice economy is. Turn the clock back to January 2016, and recreational marijuana is illegal in all but four states; sports gambling is illegal essentially everywhere; there’s no betting on your phone; OnlyFans is still months from launch; the fentanyl crisis has barely taken off; etc.

Leaning on historical regulation doesn’t match reality.
Leaning on congressional intent is even more risky–Congress was clearly anti-sports gambling.

But if states lean on these arguments the right way–acknowledging they enjoyed sports betting not because they had the right, but because they escaped enforcement–better days may lie ahead.

And if you are a state that didn’t choose sports betting? You have very little to lose.
We’re looking at you California. And Texas. And Utah.
And others similarly situated.

States Step Into Self-regulation

The irony is rich.
The states now face the same opportunity the CFTC faced in Kalshi but declined: Argue for public interest.

The CFTC doesn’t regulate prediction markets–it advocates for them. (Hardly something you’d expect from a well-functioning regulator.)
Prediction markets don’t regulate themselves–they just pretend.

So states may need to step in and fill the void.
They may need to step up and fight the permissibility fight, because the CFTC didn’t.
But they need to be prepared to kill the golden goose that is sports gambling.

Is there a world where truth becomes both reality and the best strategy?

When Truth Becomes Profitable

People often tell me:

You’re probably right, but there’s just too much money involved. They’re too powerful.

I get the reality check. “The truth doesn’t matter.”2
But incentives–not morality–drive outcomes.

Being an underdog has never fazed me. Margaret Mead once said:

Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it’s the only thing that ever has.

More importantly, I’m not naive, not anymore. I understand the powerful incentive structures. I’m an economist, after all. The key is to make sure that the moral compass and and the incentives are aligned.

The modern adaptation to one of Mother Teresa’s quotes is even better:

I alone cannot change the world, but I can cast a stone across the waters to create many ripples.

I am a stone-thrower.
For the states, the incentives are clear:
Their strongest legal argument–permissibility (not preemption!)–also benefits them.

Lose sports gambling, and casino gaming becomes more competitive.
Casinos still have social/vice costs, but not legal ones.
States can always change course later.

It’s Now or Never for the States

Will the states insist on staying the course and taking their chances on preemption?

Very possible, but the lead is fragile.
One appeals court ruling would flip the entire game for them.

If states continue on this path, they will likely lose–and lose everything.
They are marching straight into the crescent tactic trap.

If they lose sports betting, can they later argue permissibility?
Yes, but it will certainly appear disingenuous. Prediction markets will simply say:

“No state has ever argued these contracts were impermissible.
They only changed their tune after losing.”

And SCOTUS may not take the case again.
The winning moment will have already passed.

The time for states to act is NOW.
States can save casino gaming by taking a stance against sports gambling.
It’s a monstrous pill to swallow, but they must rewrite the sequence.

We’re looking at all states–
But especially you, California. You have nothing to lose.

Hop on the train. It’s about time.

Thanks for reading Full Court Press! This post is public so feel free to share it.

There may have been more ErisX-like episodes. More DCMs would have tried. But the CFTC would have stayed firm.

Of course, what I am offering is an opinion, not a 2+2=4-type truth. But an opinion based on logic, facts, and which does not create any inconsistencies becomes the best approximation of legal truth.

Litigation Sequencing — Stop #2: Preemption

Alper Ozgit — Thu, 12 Mar 2026 01:25:02 GMT

It’s Litigation Sequencing week and today we pull into Stop #2: Preemption.

On Monday, I introduced the idea of litigation sequencing–the observation that in complex regulatory disputes, the most important question is often not who is right, but which question gets answered first. Yesterday, we covered Stop #1: Permissibility. The train has already left that station. So today, we’ll put permissibility aside for a moment, shift to the next stop on the route and will discuss: Who gets to control these markets?

A Quick Recap on Permissibility

If you’re joining the series here–or just want a refresher–here’s the core question from Monday:

Permissibility: Are event contracts allowed under the Commodity Exchange Act?

In Kalshi v. CFTC, the question was narrower:

Are election market contracts allowed under the Commodity Exchange Act?

The best way to map parties’ positions is an infographic, so let us reproduce that here.

The circle: Represents the universe that contains all contingent event contracts.
The orange: The subset that the CFTC has specific review authority on.
The dark blue: The subset that the CFTC doesn’t have review authority on.

During litigation, the parties agreed on one key point: Sports events contracts involve gaming. The court concurred (PDF):

[E]vent contracts related to any of the sporting events the senator mentioned on the floor could implicate the gaming category.

… and used it as a basis to distinguish it from election contracts:

In fact, if the Court were to take anything from this floor exchange, it would be that the senator would not have intended “gaming” to include elections given the examples offered.

So, basically, the court did touch on the colloquy (PDF), and started to draw some limiting principles around the sports event contracts:

They might involve gaming; and
They were different from election contracts.

But because sports event contracts weren’t before the court, the issue was left unresolved; that gap would later matter.

This was litigation sequencing at its finest.

Kalshi didn’t win because the court decided election markets were good for society. They won because the court concluded the CFTC lacked authority to review them. The only venue to fix that was the appeal, and Kalshi went through the briefing, oral argument, etc. Throughout, they continued to distance themselves from sports event contracts. But that position, while not legally unreasonable, was certainly commercially undesirable. Kalshi realized the grand prize was now within reach, and they didn’t mind doing a colossal 180.

Next came the move that would not have happened under any other administration: Kalshi self-certified its sports event contracts (PDF). Predictably, litigation followed.

The Train Is Leaving The Station

By early May 2025, the preemption fight was already underway. Kalshi was leading on the scoreboard 2-0, having scored two early wins in Nevada (PDF) and New Jersey (PDF). In other words, the train had already begun its boarding process.

That’s when the CFTC believed it was on the wrong train, and hopped off; they dropped their appeal. They would reappear later, but in different clothes.

And just before the doors closed, I stepped through.

May 5, 2025 was the day my wonderful 19-year journey with PwC ended. I had been following prediction markets closely, and now was time to go all in. Three days later, New Jersey appealed (PDF) its loss to the Third Circuit. An amicus opportunity presented itself, and I began drafting immediately.

Because I had been tracking the litigation, the issue was obvious: The courts had moved to Stop #2 without ever resolving the permissibility of “sports event contracts” while at Stop #1. This is what created the false binary:

The False Binary - Ep. 17

Key Takeaways…

5 months ago · 1 like · Lexicon Labs

The DC litigation resolved the question:

Are election contracts allowed under the Commodity Exchange Act?

And not:

Are sports event contracts allowed under the Commodity Exchange Act?

But somehow, this “little” detail called “sports event contracts” got lost in the shuffle.

The Express Train Problem

When I lived in the Greater Chicago area, I preferred the express trains–fewer stops, faster rides. The issue is that stations are skipped and people get left behind.

Prediction market litigation is an express train.

Zoomed in, it looks like a federal vs. state fight, and today, that’s mostly true. We are squarely at Stop #2: Preemption.

Zoom out slightly, though, and you see the real reason we’re here: The permissibility question for sports event contracts is not just missing from the docket today. It never appeared on the docket, ever. The litigation train went straight to the preemption stop:

We are living inside a false binary created by Kalshi’s strategy and the CFTC’s inaction.

The states’ frustration is understandable. Sympathy may even be warranted, but sympathy cannot trump the statutes. The CFTC had the discretionary authority and chose inaction. The states were fighting against the wrong party.

That became the premise of our amicus that was filed by one of my favorite partners, Scott Brenner with Parlatore Law Group.

Our Amicus Position

6.23.2025 NFI Amicus Brief in Support of Neither Party

523KB ∙ PDF file

NFI Amicus Brief filed in KalshiEX v. CFTC in Support of Neither Party