The derivatives regulator has argued in court that CME Group lacks standing to challenge its approval of the perpetual bitcoin futures product Kalshi has offered since June, citing CME's own rising crypto volume. Ohio's governor said the state attorney general will sue prediction-market platforms after a deadline passed.
Prediction-market operators are fighting on two fronts at once: against an established exchange that wants to keep them out of traditional derivatives, and against states that want to keep them out of sports betting.
The Commodity Futures Trading Commission has argued in court that CME Group lacks standing to challenge the agency's approval of a perpetual bitcoin futures contract on Kalshi. To show that CME has not been harmed, the regulator pointed to the rise in CME's own crypto trading volume.
The case is unusual. An exchange operator is suing the federal regulator over a rival's product, and the regulator is defending the newcomer. The product is already trading: Kalshi's bitcoin perpetual was approved in May and launched in June. Perpetual futures, which have no expiry date and are popular on offshore crypto exchanges, put Kalshi in direct competition with CME's bitcoin futures business. CME's complaint, filed in federal court in Washington, cites more than a dozen perpetual products and more than $1 billion traded, and also challenges a CFTC policy statement.
Ohio's deadline passes
In Ohio, Governor Mike DeWine said the state attorney general will file lawsuits against prediction-market platforms. The Ohio Casino Control Commission had set an Oct. 16 deadline for platforms to stop offering sports contracts in the state, and most did not change their offerings. No suit had been filed by Monday afternoon.
Ohio would join a growing list of states challenging the industry. In Missouri, two operators, Crypto.com's derivatives exchange and Novig, sued the state's attorney general last week to block enforcement of cease-and-desist letters. As of Sunday, Kalshi and Polymarket had not sued in that state.
Why both cases matter
The cases turn on the same question from different directions. Prediction-market operators argue that their products are derivatives regulated by the CFTC, which would preempt state gambling laws. CME's challenge tests how far the CFTC can go in approving novel products from new venues. The states' actions test whether CFTC oversight shields sports contracts from state law.
A CFTC win against CME would strengthen Kalshi's push beyond event contracts into mainstream crypto derivatives. A string of state lawsuits would raise legal costs and could close individual states to sports contracts, which generate much of the industry's volume.
Market implications
One reading is that federal backing is the industry's strongest asset. The CFTC is defending Kalshi in court, and if federal courts agree that these are federally regulated derivatives, both CME's challenge and state actions weaken.
A second reading is that the legal risk is multiplying. Each new state lawsuit and each challenge from an incumbent exchange adds cost and uncertainty, and a single adverse ruling could set a precedent across several jurisdictions.
For CME, the case is about protecting its crypto franchise. For Robinhood and Coinbase, which offer prediction-market products, it is about the size of the opportunity.
What to watch
The court's ruling on CME's standing; the filing of Ohio's lawsuits; developments in the Missouri cases; New York's Second Circuit brief due Oct. 30; and Kalshi's response due Nov. 9 in its Supreme Court case with New Jersey, No. 26-299. A dismissal of CME's challenge would give Kalshi a clear path to expand its crypto products.