The Last Mile Problem In Legal Analysis
What happens when a robust legal analysis points somewhere no one wants to go?
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:
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.
