NPR’s Prediction Market Piece Got Event Contracts Wrong
The legal distinction they missed, why it matters, and where Kalshi and others are going to trip up in court
Key Takeaways
NPR’s framing of prediction markets misstates core legal issues, especially the meaning and role of “gaming” under federal law.
The real legal battle centers on federal preemption (currently) and whether sports event contracts involve gaming (not now, but eventually), not questions of skill.
“Gaming” is a statutory term with specific meaning, and misunderstanding it distorts how event-contract legality should be analyzed. This will ultimately determine the future of sports event contracts.
NPR published a prediction market piece yesterday. Unfortunately, the underdeveloped article doesn’t frame the issue correctly and contains several inaccuracies. This certainly wasn’t NPR’s best work and frankly, we expected better!
Our critique starts with this bit from NPR:
But the long-term outlook for this nascent industry could hinge on how a series of legal battles define a single word: Gaming.
Taken literally, that’s not wrong. The word gaming will shape the future of this industry. But once you read the full article, it becomes clear that the author doesn’t understand the actual legal landscape. The future legal battle may hinge on gaming, but the current wave of litigation is not about that at all.
NPR continues:
Kalshi allows people to place wagers on sports, news events and all manner of cultural happenings…
It’s true that most Kalshi activity is sports-related, roughly 90%, as NPR correctly points out. And yes, most of those contracts are bets. But describing all Kalshi contracts as wagers is simply inaccurate. Bloomberg made the same mistake and we called them out on it as well. When you group-wholesale an entire site like that, your journalistic credibility is cast in serious doubt. Why must it always be all or nothing? Nuance does exist.
NPR then claims:
Under federal law, “gaming” is a prohibited type of futures contract— something that is now being litigated in numerous federal courts.
The former statement is simply a mischaracterization of the law. Andrew Kim has already explained this, and his correction is worth reading:
The second statement? “Gaming” is not what’s being currently litigated, preemption is.
NPR continues:
The future of Kalshi, and perhaps the entire prediction market industry, could depend on convincing courts that placing monetary wagers on sports events is not a type of game.
The legal question is not whether sports betting is a game. It’s whether it involves gaming. These are entirely different concepts. Years ago, New York was looking into the argument of whether sports betting could be reframed as a “game of skill,” similar to daily fantasy sports. That argument never gained traction, and frankly, it shouldn’t have worked for DFS either, because DFS is not a game.
NPR also writes:
There are nineteen federal lawsuits pending at various stages grappling with the app’s legality against the backdrop of state gambling laws that have traditionally had oversight over the activity of bettors…
Did the state gambling laws traditionally have oversight over the activity of bettors? It appeared so, because the industry had misinterpreted Murphy. In reality, since at least 2000, oversight of these products has belonged to the CFTC. The agency simply chose not to act. Before 2018, there wasn’t much to act on. Yes, there was daily fantasy sports, but there was no single-game outcome betting except Nevada, and that was federally protected under another statute (PASPA). After 2018, state-regulated sports gambling got underway, so there were plenty of opportunities, and the CFTC still didn’t act. That inaction will shape the future of sports gambling far more than NPR acknowledged.
NPR again:
Kalshi has enlisted a cadre of high-profile lawyers to press their case that sports betting on the site is not a “game” and that state laws don’t apply to them, since they are federally regulated.
We follow prediction markets and the industry litigation heavily and we have not seen Kalshi argue that sports betting is not a game. Their argument is that it does not involve gaming; again, a completely separate legal issue that will likely be front and center in future litigation. This is an important distinction not only from a statutory interpretation perspective but also because Kalshi reversed their own 2024-25 litigation position that they do involve gaming. Dan Wallach has documented this. Flip-flopping appears to be quite fashionable these days.
NPR then cites a couple of sources, first being Kalshi’s lawyer, Neal Katyal:
“Mountains of authority confirm that the [federal law] preempts application of state law...”
We agree. Preemption is real, but it’s only a piece of the whole story. Even if state law is preempted, the next question is permissibility. Are these contracts even allowed to trade in the first place?
Next, NPR cites Strumpf, an academic:
“...the Supreme Court, and maybe even Congress, will have to weigh in… The fundamental thing it comes down to is what degree there is still technical skill involved [in the betting] and what the definition of 'gaming' is…"
Supreme Court involvement? Yes.
Technical skill? Irrelevant. This isn’t poker. (Andrew Kim points this out also)
Definition of gaming? Absolutely central.
NPR continues:
Still, there are guardrails. For instance, under the 1936 Commodity Exchange Act, which was updated after the 2008 financial crisis, five types of future contracts are banned: Betting on illegal activity, assassinations, terrorism, war and games.
Incorrect. Congress did not ban these categories. It instructed the CFTC to scrutinize them carefully, but left the final determination to the agency. That distinction matters because it helps identify the correct defendant (the CFTC) and the correct legal framework (the APA) (our amicus PDF). What we see today in courts are the wrong defendants (prediction markets) and incomplete arguments (preemption).
NPR then notes:
…the CFTC sought to rein in the industry by blacklisting sports and election betting… but the rule was not finalized before the Trump administration regained control in Washington.
Correct, that was the 2024 proposed rulemaking on event contracts, which CFTC Chair Selig just instructed his staff to withdraw. NPR, how and why, would you not mention this directional narrative in your article?
NPR also claims:
A D.C. federal court ruled in 2024 that election betting does not constitute “gaming”...
That’s not what the federal court ruled. The court held that the CFTC lacked authority “to conduct the public interest review it conducted” with respect to election contracts. We covered this case from top to bottom. You can start here.
NPR continues:
…in the same way as poker or slot machines, whereas courts in Maryland and Massachusetts have decided that Kalshi wagers are effectively games…
That’s not what those courts ruled either. Those cases are about preemption, not about whether Kalshi wagers are games. Our Maryland coverage starts here and we recently released our podcast on Massachusetts.
NPR adds:
When the law was updated in the 2010 Dodd-Frank Act, nobody foresaw the emergence of prediction market apps, former CFTC officials told NPR, with one describing the D.C. ruling as the industry’s “rocket-booster.”
Another false narrative. 2000 to 2010 was an eventful decade. The CFTC was well aware of sports prediction markets becoming a possibility. Early in 2004, it wagged its finger at Hedgestreet (now Nadex under the crypto.com umbrella). Later, the CFTC issued a concept release on event contracts (2008) and solicited public comments (we participated). This is in the public record, NPR, you simply needed to investigate a little further; this did not come out of nowhere. This “oh, nobody predicted this, it came out of left field” narrative is poor reporting and very tiresome.
Finally, NPR concludes:
Kalshi says it is confident federal courts will ultimately rule in its favor, but gaming attorney Wallach predicts the company has long odds.
We agree with the prediction that Kalshi is facing an uphill battle, but not with the reasoning. Wallach rejects federal preemption; we believe preemption is correct. The real stumbling block for Kalshi and others will be the gaming prong.
We offer our own predictions: The Future of Sports Gambling in America: By the Numbers.
