Federal Preemption and State Regulation of Event Contracts

Summary

The document presents Paradigm’s argument in an amicus brief concerning Maryland’s attempt to treat Kalshi’s federally regulated event contracts as gambling. It traces the case for federal oversight through the history of grain futures regulation, the creation of the Commodity Futures Trading Commission, and later legislation covering swaps. Its central claim is that contracts traded on a federally designated exchange fall under the CFTC’s exclusive jurisdiction, leaving states unable to impose conflicting rules.

The argument explains why derivatives have been treated as tools for hedging and capital allocation, and warns that state-by-state restrictions could fragment national markets and increase compliance burdens for exchanges. It is an advocacy document supporting one side in ongoing litigation, rather than a neutral legal analysis or a report on a final court decision. It provides historical and statutory reasoning but no empirical market data, and its conclusions depend on how courts interpret the relevant laws and classify event contracts.

Key ideas

• The brief argues that federal law gives the CFTC exclusive authority over contracts on designated exchanges.
• It connects modern derivatives regulation to earlier efforts to distinguish futures hedging from gambling.
• It argues that applying state gambling laws to federally regulated event contracts could fragment market oversight.
• The document advocates for one side in litigation and does not establish the court’s eventual ruling.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.