The NBA has picked its bookmakers. The courts have not picked a word.

The National Basketball Association went into the bookmaking business on Monday, and it brought a federal agency along to hold its coat. The league's announcement calls it a "comprehensive framework for NBA-related prediction markets." It consists of a memorandum of understanding with the Commodity Futures Trading Commission and the naming of Kalshi and Polymarket as the NBA's "Preferred Prediction Market Exchanges," with rights to the league's intellectual property, its marketing, and the official statistics feed from Sportradar. In plainer English, an agency whose markets were built so that, in Gary Gensler's phrase, "farmers, ranchers, and merchants" could hedge price risk has shaken hands with a basketball league so that you can put twenty dollars on the Bulls in Salt Lake City, where putting twenty dollars on the Bulls is against the law. On Tuesday the agency sued Utah for trying to enforce it.

The terms are what you would expect from a league that saw this coming. League and team personnel are barred from trading NBA contracts. The exchanges must share information about investigations and suspicious trading. Scott Kaufman-Ross, who runs media distribution and partnerships for the league, said that "protecting the integrity of the game is our top priority." Kalshi's head of sports partnerships, Adam Barrick, called the deal "a significant milestone." CFTC Chairman Michael S. Selig said the NBA "joins the MLB and NHL in taking a responsible step toward protecting sports integrity," baseball having signed on March 19 and hockey on May 21. The league also expanded its deal with DraftKings to cover prediction markets, so the sportsbook will now sell the product that a federal judge has called virtually indistinguishable from a sportsbook's. We will get to her.

The National Football League did not sign. On October 8 it filed a 32-page brief in the Supreme Court on the other side, with William P. Barr's name on the cover, reporting that on the first Sunday of this season $1.8 billion of the $3.3 billion traded on prediction markets was football. The NFL wants the states to run this. The NBA wants Washington to. One league is asking for a lifeguard and the other has opened a towel concession.

All of it turns on a definition. In 2010 Congress passed Dodd-Frank to deal with the derivatives that had just helped flatten the economy, and in it defined a "swap" to include any contract whose payout is "dependent on the occurrence, nonoccurrence, or the extent of the occurrence of an event or contingency associated with a potential financial, economic, or commercial consequence." A swap traded on a federally registered exchange belongs to the CFTC and to no one else. So the question is what counts as an event with a commercial consequence. A change in interest rates, yes. The Bulls covering the spread? The Bulls have sponsors, and sponsors have consequences, and if you follow that thought to the end of the block, so does everything that has ever happened to anyone.

Congress also knew what people do with a market in events, so in the same law it wrote a Special Rule. The Commission may bar any event contract that involves "activity that is unlawful under any Federal or State law," terrorism, assassination, war, "gaming," or anything similar. Gaming is fifth on a list of six. The fourth item is war. In July 2011 the Commission, with Gensler in the chair, made the list a regulation. Rule 40.11 says a registered exchange shall not list a contract that "involves, relates to, or references terrorism, assassination, war, gaming, or an activity that is unlawful under any State or Federal law." It is still on the books. By this April, a court of appeals noted, the Commission had never once used it against a sports contract. That court took the silence for permission. The next one took the rule for a rule.

The Third Circuit went first, on April 6, in Kalshi's case against New Jersey, two judges to one. Judge David Porter wrote that the outcome of a game "can be associated with a potential financial, economic, or commercial consequence," pointed to "sponsors, advertisers, television networks, franchises, and local and national communities," and concluded that "the analysis need not go further." As for Rule 40.11, the majority observed that the Commission had "not yet acted to review or prohibit any sports-related event contracts" and treated the silence as a decision. Swaps, federal, New Jersey go home. Judge Jane Roth dissented, and she did her homework the way I do mine. She went to Kalshi's page for the Panthers at Tampa Bay on January 3 and found she could bet the winner, the 2.5-point spread, the over on 45 points, and whether Mike Evans would score a touchdown, offerings "virtually indistinguishable from the betting products available on online sportsbooks, such as DraftKings and FanDuel." She called the whole arrangement "a performative sleight meant to obscure the reality that Kalshi's products are sports gambling." Her dissent runs 21 pages. The opinion it dissents from runs 17.

The Ninth Circuit answered on August 28, unanimously, in Kalshi's case against Nevada. Judge Ryan Nelson's opinion contains the sentence "Kalshi has a gambling problem," which is the kind of sentence that writes the rest of the column for you. The record showed Kalshi advertising itself as "the first app for legal sports betting in all 50 states," and that in 2025 more than 90 percent of its trades, and 95 percent of its revenue, were sports. Then the court described the product. A customer at Caesars Sportsbook bets the Raiders to win by more than 7.5 points and collects if they do. On the Kalshi app the same customer buys a contract on the Raiders winning by more than 7.5 points and collects if they do. "Everyone, including Kalshi, knows it when they see it," the court said, and declined to believe that Congress had put a national sports book inside a bank bill, "hiding an elephant in a mousehole." It read Rule 40.11 as meaning what it says. On September 25 the Sixth Circuit, in Kalshi's cases against Ohio and Tennessee, agreed, three to nothing. For an event to count, Judge Julia Smith Gibbons wrote, it "must be intrinsically associated with a financial consequence," and a ballgame has "only downstream economic consequences." The appellate scoreboard stands at seven judges for the states and two for Kalshi.

Now the regulator. On October 19 the Commission published two documents in the Federal Register, 23 pages between them, and they are a matched set. The first, eleven pages, is an interim final rule, which is the government's name for a rule that takes effect before anyone outside the building has read it. It became law the morning it appeared. Comments are welcome through November 18, after the fact, and the Commission explains that "good cause exists to make this rule effective immediately upon publication" because of "confusion" and an "emerging circuit split." It then declares that a wager accepted by a licensed sportsbook and a hand at a licensed casino's table are not swaps. A trade on a registered exchange gets no such exclusion. The distinction, as the Commission draws it, is who is on the other side of your money. If it is the house, you are gambling. If it is a stranger matched by a computer, you are in finance. Footnote 97 puts the April 2026 volume on two prediction markets at $24 billion, which explains both the urgency and the fuss.

The second document, twelve pages, is a proposal. It would amend the definition of swap to add "(G) Event contracts, including those based on sports-, politics-, cultural, and weather-related events." It concedes in so many words that "sports are a type of 'gam[e]'" and says the Commission "retains authority under the Special Rule to prohibit event contracts involving 'gaming'" that it finds against the public interest. So sports bets are swaps, and the states may not touch them; and sports bets are gaming, and the Commission may forbid them whenever it chooses. The agency is asking to hold every card in the deck and to deal. The proposal records its vote on the last page: "Chairman Selig voted in the affirmative. No Commissioner voted in the negative." The Commission, its own website says, "consists of five Commissioners." The website lists one. Unanimity has never come so cheaply.

Then it goes to court, which is where Chairman Selig's Commission spends its afternoons. Tuesday's complaint against Utah was, by the agency's own count, its tenth suit against a state, on top of briefs in four federal courts of appeals and one state supreme court. "Congress entrusted the CFTC to be the federal regulator with sole responsibility to oversee these markets," the chairman said, and defending that jurisdiction is "exactly what we'll do." New Jersey's petition counts "at least 39 lawsuits across 20 States." Baltimore sued Kalshi and Polymarket in August under its consumer protection ordinance, and Mayor Brandon Scott said the companies "are running sportsbooks without licenses and betting that a new label will put them above the law." Ohio, 38 other states and the District of Columbia told the Supreme Court that the courts are "hopelessly confused and divided" and that "the States sit in a regulatory turf war with the CFTC." Forty attorneys general agreeing on anything is itself an event with a commercial consequence.

The best briefs on the docket come from the two men who were there. Gensler ran the CFTC from 2009 to 2014, led it through 67 rules, orders and guidance documents implementing Dodd-Frank, and testified to Congress 54 times as chairman without, he says, a single mention of sports betting. His brief observes that Senate Majority Leader Harry Reid of Nevada "would never have consented to legislation displacing an activity so critical to his state's economy and politics." Former Senator Christopher Dodd, whose name is on the law, filed the same day. "Sports betting had nothing to do with that crisis," he writes, and the Third Circuit's reading "would transform the CFTC into a national gambling regulator." When the man who wrote the statute and the man who wrote the regulation both tell the Court that neither document means what the agency now says it means, the agency does not have a circuit split. It has a reading problem.

The case is Flaherty v. KalshiEX, No. 26-299. New Jersey's petition was docketed September 8 and runs 332 pages, 33 of petition and the rest appendix, which is how lawyers say a thing twice. It asks the Court to decide whether Dodd-Frank "preempted States from regulating sports bets that occur within their jurisdictions if those bets are offered on markets registered with the Commodity Futures Trading Commission." Kalshi's response is due November 9. Eleven friend-of-the-court briefs are already in, among them one from 145 Indian tribes and one each from the American Gaming Association and the Casino Association of New Jersey, which puts the casinos, for once, on the side of the people who regulate them.

The scoreboard

Here is where I come out, and I will not make you wait for it. I would let you bet on the Bulls in all fifty states, by statute, with the word bet in it. Thirty-nine states and the District of Columbia have legalized sports betting since the Supreme Court let them in 2018, and every one of them did it the dull way, by statute or by ballot measure, with a vote somebody could count. That is how a free country changes a gambling law. It is not how a free country changes a gambling law when a commission of one publishes eleven pages on October 19, declares them effective on arrival, and sues Utah eight days later. The burden of proof belongs to the regulator who wants the new power. The proof on offer is a definition from a bank bill, a rule the agency wrote in 2011 and has yet to apply to a sports contract, and a promise to decide later which games are gaming. Kalshi says it is not a sportsbook. On Monday the NBA signed it as one. A bet is a bet, and the Court should say so.

Columns are the views of their authors. They are not legal advice and not the position of the firm.