---
type: claim
domain: internet-finance
description: The 3rd Circuit's April 2026 Kalshi ruling creates federal preemption only for CFTC-licensed designated contract markets, not for on-chain protocols
confidence: experimental
source: 3rd Circuit Court of Appeals, Kalshi ruling, April 7, 2026
created: 2026-04-08
title: CFTC-licensed DCM preemption protects centralized prediction markets from state gambling law but leaves decentralized governance markets legally exposed because they cannot access the DCM licensing pathway
agent: rio
scope: structural
sourcer: CNBC
related_claims: ["[[futarchy-governed entities are structurally not securities because prediction market participation replaces the concentrated promoter effort that the Howey test requires]]", "[[the DAO Reports rejection of voting as active management is the central legal hurdle for futarchy because prediction market trading must prove fundamentally more meaningful than token voting]]"]
related: ["Prediction market SCOTUS cert is likely by early 2027 because three-circuit litigation pattern creates formal split by summer 2026 and 34-state amicus participation signals federalism stakes justify review", "cftc-licensed-dcm-preemption-protects-centralized-prediction-markets-but-not-decentralized-governance-markets", "third-circuit-ruling-creates-first-federal-appellate-precedent-for-cftc-preemption-of-state-gambling-laws", "polymarket-achieved-us-regulatory-legitimacy-through-qcx-acquisition-establishing-prediction-markets-as-cftc-regulated-derivatives", "dcm-field-preemption-protects-all-contracts-on-registered-platforms-regardless-of-type", "prediction-market-scotus-cert-likely-by-early-2027-because-three-circuit-litigation-pattern-creates-formal-split-by-summer-2026-and-34-state-amicus-participation-signals-federalism-stakes-justify-review", "section-4c-authorization-is-more-legally-durable-than-field-preemption-for-prediction-market-sports-contracts"]
reweave_edges: ["Prediction market SCOTUS cert is likely by early 2027 because three-circuit litigation pattern creates formal split by summer 2026 and 34-state amicus participation signals federalism stakes justify review|related|2026-04-19", "Third Circuit ruling creates first federal appellate precedent for CFTC preemption of state gambling laws making Supreme Court review near-certain|supports|2026-04-20"]
supports: ["Third Circuit ruling creates first federal appellate precedent for CFTC preemption of state gambling laws making Supreme Court review near-certain"]

### Auto-enrichment (near-duplicate conversion, similarity=1.00)
*Source: PR #3530 — "cftc licensed dcm preemption protects centralized prediction markets but not decentralized governance markets"*
*Auto-converted by substantive fixer. Review: revert if this evidence doesn't belong here.*

## Extending Evidence

**Source:** MultiState, March 2026

Curtis-Schiff Prediction Markets Are Gambling Act scope explicitly targets CFTC-registered DCM platforms (Kalshi, Polymarket) but does NOT address on-chain prediction markets or futarchy governance markets on blockchain platforms—confirming the centralized/decentralized regulatory split.


### Auto-enrichment (near-duplicate conversion, similarity=1.00)
*Source: PR #3542 — "cftc licensed dcm preemption protects centralized prediction markets but not decentralized governance markets"*
*Auto-converted by substantive fixer. Review: revert if this evidence doesn't belong here.*

## Challenging Evidence

**Source:** Judge Nelson, Ninth Circuit oral arguments April 16, 2026

Judge Nelson's Rule 40.11 paradox argument directly challenges DCM preemption logic: CFR Rule 40.11 prohibits DCMs from listing gaming contracts unless CFTC grants exception. If sports event contracts are gaming contracts (Nelson: 'You go to a casino to make sports bets'), then CFTC's own rules forbid rather than authorize them on DCMs, eliminating the preemption shield. This creates structural contradiction where the same CFTC framework that prediction markets cite for federal preemption simultaneously prohibits their core product. Nevada's attorney characterized sports event contracts as functionally identical to sports books, strengthening gaming classification argument.


### Auto-enrichment (near-duplicate conversion, similarity=1.00)
*Source: PR #3545 — "cftc licensed dcm preemption protects centralized prediction markets but not decentralized governance markets"*
*Auto-converted by substantive fixer. Review: revert if this evidence doesn't belong here.*

## Challenging Evidence

**Source:** Curtis-Schiff Prediction Markets Are Gambling Act, March 23, 2026

The Curtis-Schiff bill would legislatively override CFTC DCM preemption for sports contracts by redefining them as gambling products requiring state gaming licenses. This demonstrates that CFTC registration provides only regulatory defense against agency interpretation, not against Congressional redefinition. The bill's explicit scope limitation to DCM platforms suggests decentralized governance markets may remain outside legislative reach, but centralized platforms face existential legislative risk regardless of CFTC registration status.


### Auto-enrichment (near-duplicate conversion, similarity=1.00)
*Source: PR #3550 — "cftc licensed dcm preemption protects centralized prediction markets but not decentralized governance markets"*
*Auto-converted by substantive fixer. Review: revert if this evidence doesn't belong here.*

## Challenging Evidence

**Source:** Curtis-Schiff bill, March 23, 2026

Bipartisan Senate legislation (Curtis R-Utah, Schiff D-California) would eliminate DCM preemption by statutory redefinition of sports contracts as gambling products requiring state licenses. Utah sponsorship (non-gaming state) indicates opposition broader than revenue protection, suggesting political durability beyond gaming industry lobbying.


### Auto-enrichment (near-duplicate conversion, similarity=1.00)
*Source: PR #3570 — "cftc licensed dcm preemption protects centralized prediction markets but not decentralized governance markets"*
*Auto-converted by substantive fixer. Review: revert if this evidence doesn't belong here.*

## Challenging Evidence

**Source:** Curtis-Schiff Prediction Markets Are Gambling Act, March 2026

Curtis-Schiff bill would eliminate DCM preemption protection for sports contracts through statutory redefinition, showing that CFTC registration does not provide durable protection against Congressional action. The legislative pathway bypasses the court battles over field preemption by directly amending the statutory framework that defines CFTC jurisdiction.


### Auto-enrichment (near-duplicate conversion, similarity=1.00)
*Source: PR #3595 — "cftc licensed dcm preemption protects centralized prediction markets but not decentralized governance markets"*
*Auto-converted by substantive fixer. Review: revert if this evidence doesn't belong here.*

## Challenging Evidence

**Source:** casino.org, April 20, 2026; Judge Nelson oral argument quotes

Judge Nelson's Rule 40.11 paradox argument directly challenges the DCM preemption shield: CFR Rule 40.11 prohibits DCMs from listing gaming contracts unless the CFTC grants an exception. Nelson argued that if sports contracts are gaming contracts (which he suggested by stating 'You go to a casino to make sports bets'), then the CFTC's own rules forbid rather than authorize them on DCMs. This eliminates the federal authorization that prediction markets claim as the basis for preempting state gambling laws. The paradox: prediction markets cite CFTC registration as their preemption shield, but CFTC rules may actually prohibit their core product.


### Auto-enrichment (near-duplicate conversion, similarity=1.00)
*Source: PR #3601 — "cftc licensed dcm preemption protects centralized prediction markets but not decentralized governance markets"*
*Auto-converted by substantive fixer. Review: revert if this evidence doesn't belong here.*

## Challenging Evidence

**Source:** Judge Nelson, Ninth Circuit oral arguments, April 16, 2026

Judge Nelson's Rule 40.11 argument creates a preemption paradox: CFR Rule 40.11 prohibits DCMs from listing gaming contracts unless the CFTC grants an exception. If sports event contracts are gaming contracts (as Nevada argues and Nelson appears to accept), then the CFTC framework that prediction markets cite for federal preemption simultaneously forbids their core product. Nelson stated: 'You go to a casino to make sports bets' when CFTC attorney Jordan Minot argued the agency doesn't define sports contracts as 'involving gaming.' This challenges the claim that DCM registration provides reliable preemption protection, as the protection may be self-negating if the contracts are classified as gaming.


### Auto-enrichment (near-duplicate conversion, similarity=1.00)
*Source: PR #3604 — "cftc licensed dcm preemption protects centralized prediction markets but not decentralized governance markets"*
*Auto-converted by substantive fixer. Review: revert if this evidence doesn't belong here.*

## Challenging Evidence

**Source:** Judge Nelson, Ninth Circuit oral arguments April 16, 2026; casino.org analysis

Judge Nelson's Rule 40.11 paradox argument: CFR Rule 40.11 prohibits DCMs from listing gaming contracts unless the CFTC grants an exception. If sports event contracts are gaming contracts (Nelson: 'You go to a casino to make sports bets'), then the CFTC framework that prediction markets claim as the basis for federal preemption simultaneously forbids their core product. This eliminates the preemption shield entirely. Nevada's attorney characterized sports event contracts as functionally identical to sports books, focusing on consumer protection and tax revenue arguments. The paradox: DCM registration cannot provide preemption if CFTC's own rules prohibit the contracts being preempted.


### Auto-enrichment (near-duplicate conversion, similarity=1.00)
*Source: PR #3606 — "cftc licensed dcm preemption protects centralized prediction markets but not decentralized governance markets"*
*Auto-converted by substantive fixer. Review: revert if this evidence doesn't belong here.*

## Challenging Evidence

**Source:** Bloomberg Law, April 17, 2026

Judge Nelson's Rule 40.11 framing at Ninth Circuit oral arguments: CFTC's own regulations prohibit DCMs from listing gaming contracts unless CFTC grants an exception. Nelson stated prediction markets have two options — they can't do the activity at all, or they're regulated by the state. The federal authorization they claim either doesn't exist (gaming is prohibited on DCMs) or requires explicit CFTC permission (which hasn't been granted specifically for sports event contracts). CFTC attorney Minot's response (arguing CFTC doesn't define sports contracts as 'gaming') was apparently unpersuasive to all three judges.


### Auto-enrichment (near-duplicate conversion, similarity=1.00)
*Source: PR #3608 — "cftc licensed dcm preemption protects centralized prediction markets but not decentralized governance markets"*
*Auto-converted by substantive fixer. Review: revert if this evidence doesn't belong here.*

related: ["Prediction market SCOTUS cert is likely by early 2027 because three-circuit litigation pattern creates formal split by summer 2026 and 34-state amicus participation signals federalism stakes justify review", "cftc-licensed-dcm-preemption-protects-centralized-prediction-markets-but-not-decentralized-governance-markets", "third-circuit-ruling-creates-first-federal-appellate-precedent-for-cftc-preemption-of-state-gambling-laws", "polymarket-achieved-us-regulatory-legitimacy-through-qcx-acquisition-establishing-prediction-markets-as-cftc-regulated-derivatives", "dcm-field-preemption-protects-all-contracts-on-registered-platforms-regardless-of-type", "prediction-market-scotus-cert-likely-by-early-2027-because-three-circuit-litigation-pattern-creates-formal-split-by-summer-2026-and-34-state-amicus-participation-signals-federalism-stakes-justify-review", "section-4c-authorization-is-more-legally-durable-than-field-preemption-for-prediction-market-sports-contracts"]


## Challenging Evidence

**Source:** Judge Nelson, Ninth Circuit oral arguments, April 16, 2026

Judge Nelson's Rule 40.11 paradox argument: CFR Rule 40.11 prohibits DCMs from listing gaming contracts unless the CFTC grants an exception. If sports event contracts are gaming contracts (Nelson: 'You go to a casino to make sports bets'), then the very CFTC framework that prediction markets claim as the basis for federal preemption over state gaming laws also forbids their core product - eliminating the preemption shield. This challenges the claim that DCM registration provides preemption protection, as the protection may be self-negating if the contracts are classified as gaming.


### Auto-enrichment (near-duplicate conversion, similarity=1.00)
*Source: PR #3618 — "cftc licensed dcm preemption protects centralized prediction markets but not decentralized governance markets"*
*Auto-converted by substantive fixer. Review: revert if this evidence doesn't belong here.*

## Challenging Evidence

**Source:** Judge Nelson, Ninth Circuit oral arguments, April 16, 2026

Judge Nelson's Rule 40.11 paradox argument directly challenges the DCM preemption shield: 'The only way to get around it is if you get permission first.' If sports event contracts are gaming contracts (Nelson: 'You go to a casino to make sports bets'), then CFTC Rule 40.11 prohibits DCMs from listing them unless the CFTC grants an exception. This creates a structural contradiction where the same CFTC framework that prediction markets cite for federal preemption also forbids their core product, potentially eliminating the preemption defense entirely.


### Auto-enrichment (near-duplicate conversion, similarity=1.00)
*Source: PR #3623 — "cftc licensed dcm preemption protects centralized prediction markets but not decentralized governance markets"*
*Auto-converted by substantive fixer. Review: revert if this evidence doesn't belong here.*

## Challenging Evidence

**Source:** MultiState legislative tracking, March 23, 2026

The Curtis-Schiff bill would eliminate DCM preemption protection through Congressional redefinition of sports contracts as gambling products requiring state licenses. This shows the preemption is not structurally durable—it depends on Congressional forbearance and can be overridden through legislation regardless of court precedent. Bipartisan sponsorship (Curtis R-Utah, Schiff D-California) increases passage probability beyond partisan gaming revenue fights.


### Auto-enrichment (near-duplicate conversion, similarity=1.00)
*Source: PR #3624 — "cftc licensed dcm preemption protects centralized prediction markets but not decentralized governance markets"*
*Auto-converted by substantive fixer. Review: revert if this evidence doesn't belong here.*

## Challenging Evidence

**Source:** casino.org reporting on Ninth Circuit oral arguments, April 16, 2026

Judge Nelson's Rule 40.11 paradox argument at oral arguments: CFR Rule 40.11 prohibits DCMs from listing gaming contracts unless the CFTC grants an exception. If sports event contracts are gaming contracts (Nelson: 'You go to a casino to make sports bets'), then the CFTC framework that Kalshi claims authorizes them also forbids their core product. This eliminates the preemption shield because the federal authorization they rely on simultaneously prohibits what they're doing. Nevada's attorney characterized sports event contracts as functionally identical to sports books, focusing on consumer protection and tax revenue arguments.


### Auto-enrichment (near-duplicate conversion, similarity=1.00)
*Source: PR #3629 — "cftc licensed dcm preemption protects centralized prediction markets but not decentralized governance markets"*
*Auto-converted by substantive fixer. Review: revert if this evidence doesn't belong here.*

## Extending Evidence

**Source:** MultiState, March 2026

Curtis-Schiff bill scope explicitly targets CFTC-registered DCM platforms while remaining silent on on-chain prediction markets and futarchy governance, confirming the regulatory bifurcation between centralized and decentralized implementations


### Auto-enrichment (near-duplicate conversion, similarity=1.00)
*Source: PR #3640 — "cftc licensed dcm preemption protects centralized prediction markets but not decentralized governance markets"*
*Auto-converted by substantive fixer. Review: revert if this evidence doesn't belong here.*

## Challenging Evidence

**Source:** Judge Nelson, Ninth Circuit oral arguments April 16, 2026

Judge Nelson's Rule 40.11 paradox argument directly challenges the DCM preemption shield: 'You go to a casino to make sports bets' — treating sports event contracts as gaming contracts. If sports contracts are gaming contracts, then CFR Rule 40.11 ('shall not list for trading' gaming contracts without CFTC exception) means CFTC's own rules prohibit rather than authorize them on DCMs. This eliminates the federal preemption argument that DCM registration provides, because the authorization itself is conditional on NOT being gaming contracts. Nevada's attorney emphasized this functional equivalence to sports books throughout oral arguments.


### Auto-enrichment (near-duplicate conversion, similarity=1.00)
*Source: PR #3663 — "cftc licensed dcm preemption protects centralized prediction markets but not decentralized governance markets"*
*Auto-converted by substantive fixer. Review: revert if this evidence doesn't belong here.*

## Challenging Evidence

**Source:** Curtis-Schiff Prediction Markets Are Gambling Act, March 2026

Curtis-Schiff bill would eliminate DCM preemption for sports contracts by explicitly prohibiting CFTC-registered platforms from listing them, showing that Congressional action can override CFTC's exclusive jurisdiction claim through statutory redefinition rather than requiring judicial interpretation.


### Auto-enrichment (near-duplicate conversion, similarity=1.00)
*Source: PR #3674 — "cftc licensed dcm preemption protects centralized prediction markets but not decentralized governance markets"*
*Auto-converted by substantive fixer. Review: revert if this evidence doesn't belong here.*

## Challenging Evidence

**Source:** casino.org, April 20, 2026; Judge Nelson oral argument transcript

Judge Nelson's Rule 40.11 analysis creates a preemption paradox: CFR Rule 40.11 prohibits DCMs from listing gaming contracts unless the CFTC grants an exception. Nelson stated: '40.11 says any regulated entity shall not list for trading gaming contracts. It prohibits it from going on.' When CFTC attorney Jordan Minot argued the agency doesn't define sports contracts as 'involving gaming,' Nelson replied: 'You go to a casino to make sports bets.' This means the very CFTC framework that prediction markets claim as the basis for federal preemption over state gaming laws also forbids their core product—eliminating the preemption shield they rely on.


### Auto-enrichment (near-duplicate conversion, similarity=1.00)
*Source: PR #3696 — "cftc licensed dcm preemption protects centralized prediction markets but not decentralized governance markets"*
*Auto-converted by substantive fixer. Review: revert if this evidence doesn't belong here.*

## Challenging Evidence

**Source:** Judge Nelson, Ninth Circuit oral arguments, April 16, 2026

Judge Nelson's Rule 40.11 paradox argument at Ninth Circuit oral arguments: CFTC Rule 40.11 explicitly prohibits DCMs from listing gaming contracts ('shall not list for trading') unless the CFTC grants an exception. If sports event contracts are gaming contracts (as Nevada argues and Nelson appears to accept: 'You go to a casino to make sports bets'), then the very CFTC framework that prediction markets cite for federal preemption actually forbids their core product. This eliminates the preemption shield by making CFTC authorization self-contradictory. The challenge is structural: DCM registration cannot provide preemption if CFTC's own rules prohibit the contracts being preempted.


### Auto-enrichment (near-duplicate conversion, similarity=1.00)
*Source: PR #3669 — "cftc licensed dcm preemption protects centralized prediction markets but not decentralized governance markets"*
*Auto-converted by substantive fixer. Review: revert if this evidence doesn't belong here.*

## Challenging Evidence

**Source:** Prediction Markets Are Gambling Act, Curtis-Schiff, March 23, 2026

Curtis-Schiff bill would eliminate DCM preemption protection by Congressional redefinition of sports contracts as gambling products requiring state gaming licenses. This represents a legislative override pathway that makes DCM registration insufficient protection—if the bill passes, CFTC-registered platforms would be prohibited from listing sports contracts regardless of preemption doctrine. The scope limitation (DCM platforms only, not on-chain markets) preserves the decentralized governance market distinction but eliminates the centralized platform protection mechanism.


### Auto-enrichment (near-duplicate conversion, similarity=1.00)
*Source: PR #3720 — "cftc licensed dcm preemption protects centralized prediction markets but not decentralized governance markets"*
*Auto-converted by substantive fixer. Review: revert if this evidence doesn't belong here.*

## Challenging Evidence

**Source:** casino.org, April 20, 2026; Judge Nelson oral argument quotes, April 16, 2026

Judge Nelson's Rule 40.11 paradox argument directly challenges the DCM preemption shield: 'Rule 40.11 says any regulated entity shall not list for trading gaming contracts. It prohibits it from going on. The only way to get around it is if you get permission first.' When CFTC attorney Jordan Minot argued the agency doesn't define sports contracts as 'involving gaming,' Nelson replied: 'You go to a casino to make sports bets.' This creates a structural contradiction: if prediction markets claim CFTC registration as DCMs as the basis for federal preemption over state gaming laws, but the CFTC's own Rule 40.11 prohibits DCMs from listing gaming contracts, then the very framework that authorizes them also forbids their core product — eliminating the preemption shield they rely on. Nevada's attorney characterized sports event contracts as functionally identical to sports books, strengthening the gaming classification argument.


### Auto-enrichment (near-duplicate conversion, similarity=1.00)
*Source: PR #3741 — "cftc licensed dcm preemption protects centralized prediction markets but not decentralized governance markets"*
*Auto-converted by substantive fixer. Review: revert if this evidence doesn't belong here.*

## Challenging Evidence

**Source:** Judge Nelson, Ninth Circuit oral arguments April 16, 2026

Judge Nelson's Rule 40.11 paradox argument directly challenges the preemption shield: CFR Rule 40.11 states regulated entities 'shall not list for trading' gaming contracts unless CFTC grants exception. Nelson's exact quote: 'It prohibits it from going on. The only way to get around it is if you get permission first.' This creates a structural contradiction: if sports event contracts are gaming contracts (which Nevada argues and Nelson appears to accept), then CFTC's own rules prohibit rather than authorize them on DCMs, eliminating the federal preemption shield that DCM registration supposedly provides. The paradox is that prediction markets claim DCM registration as basis for preemption, but that same CFTC framework forbids their core product category.

---

# CFTC-licensed DCM preemption protects centralized prediction markets from state gambling law but leaves decentralized governance markets legally exposed because they cannot access the DCM licensing pathway

The 3rd Circuit ruled 2-1 that New Jersey cannot regulate Kalshi's sports event contracts under state gambling law because the contracts are traded on a CFTC-licensed designated contract market (DCM), making federal law preemptive. This is the first appellate court decision affirming CFTC exclusive jurisdiction over prediction markets against state-level opposition. However, the ruling addresses Kalshi specifically as a CFTC-licensed DCM. The agent notes explicitly flag that 'any mention of how the ruling applies to on-chain or decentralized prediction markets (Polymarket, MetaDAO governance markets)' is absent. Decentralized protocols that cannot obtain DCM licenses may not benefit from the same preemption logic. This creates an asymmetry where centralized, regulated prediction markets gain legal protection while decentralized futarchy governance markets remain in regulatory ambiguity—potentially inverting the protection advantage that decentralized systems were assumed to have.

## Extending Evidence

**Source:** 3rd Circuit ruling, April 7, 2026

The 3rd Circuit's 'DCM trading field preemption' theory provides the specific legal mechanism: CEA preempts state gaming law for all contracts on registered DCMs because the preempted field is the trading activity itself, not individual contract types. This is the broadest available interpretation and creates maximum protection for centralized platforms. The 2-1 ruling indicates judicial disagreement on this framework.


## Challenging Evidence

**Source:** MultiState legislative tracking, March 2026

The Curtis-Schiff bill shows that CFTC DCM preemption is vulnerable to Congressional override—the legislative branch can redefine sports contracts as gambling products requiring state licenses, effectively nullifying CFTC exclusive jurisdiction through statutory redefinition rather than waiting for judicial interpretation.


## Challenging Evidence

**Source:** MultiState, Curtis-Schiff bill analysis, March 23, 2026

Curtis-Schiff Prediction Markets Are Gambling Act would eliminate DCM preemption for sports contracts by Congressional redefinition. The bill explicitly prohibits CFTC-registered platforms from listing sports/casino products, showing that DCM registration does not guarantee permanent regulatory protection against legislative action. Scope is limited to centralized platforms; does not explicitly address on-chain markets.


## Challenging Evidence

**Source:** Curtis-Schiff bill, March 23, 2026

Bipartisan Senate legislation to reclassify sports contracts as gambling demonstrates that DCM preemption is vulnerable to Congressional override through statutory redefinition, not just court interpretation—reducing the durability of CFTC protection even for centralized platforms


## Challenging Evidence

**Source:** Judge Nelson, Ninth Circuit oral arguments, April 16, 2026

Judge Nelson's Rule 40.11 argument creates a preemption paradox: CFR Rule 40.11 prohibits DCMs from listing gaming contracts unless CFTC grants an exception. Nelson stated: 'You go to a casino to make sports bets' when CFTC attorney argued sports contracts don't involve gaming. If sports event contracts are gaming contracts, then CFTC's own rules prohibit rather than authorize them on DCMs, eliminating the preemption shield. This challenges the claim that DCM registration provides preemption protection—it may instead create a regulatory trap where the authorization framework simultaneously forbids the product.


## Challenging Evidence

**Source:** casino.org, April 20, 2026; Judge Nelson oral argument quotes

Judge Nelson's Rule 40.11 paradox argument directly challenges the DCM preemption shield: if sports event contracts are gaming contracts (which Nevada argues and Nelson appears to accept: 'You go to a casino to make sports bets'), then CFR Rule 40.11 prohibits DCMs from listing them unless CFTC grants an exception. This means the same CFTC framework that prediction markets cite for federal preemption also forbids their core product, potentially eliminating the preemption defense entirely. Nevada characterized sports event contracts as 'functionally identical to sports books,' focusing on consumer protection and tax revenue arguments.


## Challenging Evidence

**Source:** MultiState, March 2026

Curtis-Schiff bill would eliminate DCM preemption for sports contracts through Congressional redefinition, showing that CFTC registration does not provide permanent regulatory protection against legislative action


## Extending Evidence

**Source:** MultiState, March 2026 Curtis-Schiff bill analysis

Curtis-Schiff bill scope explicitly targets CFTC-registered DCM platforms but does NOT address on-chain prediction markets or futarchy governance markets on blockchain platforms. This creates a regulatory arbitrage opportunity where decentralized governance markets may avoid the legislative threat that centralized platforms face, even though both use similar prediction market mechanisms.


## Challenging Evidence

**Source:** Ohio Casino Control Commission via casino.org, 2026-04-15

Ohio Casino Control Commission imposed a $5M fine on Kalshi for operating as an unlicensed sportsbook, despite Kalshi's DCM registration. This is the largest state-imposed financial penalty on a prediction market operator documented. The enforcement action occurred after 'a federal court determination' (exact nature unverified), suggesting that DCM registration may not provide blanket preemption protection even for centralized platforms. The fine amount ($5M) is 10x larger than the largest politician-related prediction market fines tracked, indicating Ohio treats this as a serious commercial offense rather than a technical regulatory infraction.


## Challenging Evidence

**Source:** New York AG lawsuit against Coinbase/Gemini, omission of Kalshi, April 21, 2026

Coinbase (which operates Coinbase Derivatives, a DCM-adjacent entity) was sued by New York AG despite federal licensing, suggesting DCM licensure alone does not protect operators from state gambling enforcement without proactive federal litigation. Kalshi's preemptive federal suit strategy appears to be the distinguishing factor in avoiding state charges.


## Challenging Evidence

**Source:** Nevada Independent, 9th Circuit preliminary ruling, Feb 17 2026

The 9th Circuit's February 17, 2026 one-page decision upheld Nevada's preliminary injunction against Kalshi despite Kalshi's CFTC DCM registration. Nevada filed a civil enforcement action the same day seeking permanent block. The CFTC simultaneously filed amicus briefs supporting Kalshi, creating a federal agency conflict. This demonstrates that CFTC designation does not automatically preempt state civil enforcement during pending federal proceedings.


## Challenging Evidence

**Source:** Fortune April 20, 2026, quoting industry lawyers on 9th Circuit hearing

Industry lawyers characterize the Kalshi SCOTUS path as 'a true jump ball' with genuine uncertainty at each stage, not a case where federal preemption has clear legal advantage. If SCOTUS reverses the 3rd Circuit pro-preemption precedent, this would retroactively harm Kalshi even in states where it currently operates under DCM protection, demonstrating that DCM preemption is not a settled legal shield but an active battleground through 2027.


## Challenging Evidence

**Source:** MCAI Lex Vision, 9th Circuit hearing analysis, April 16, 2026

Rule 40.11 paradox creates structural contradiction in CFTC preemption claims: CFTC's own Rule 40.11 excludes from CEA jurisdiction 'agreements, contracts, transactions, or swaps on gaming or activities unlawful under state law.' If Nevada gambling law bans prediction market contracts, CFTC's own rule removes them from CEA jurisdiction, undermining the preemption argument. Judge Nelson appeared to agree with this reading during oral arguments, suggesting DCM registration may not provide the jurisdictional protection previously assumed.


## Extending Evidence

**Source:** Law360, April 21, 2026 — California federal court stay order

California federal judge ordered parties to explain why their prediction market case (involving Golden State indigenous groups, KalshiEx, and Robinhood) shouldn't be stayed pending the 9th Circuit's merits decision in Kalshi v. Nevada. Multiple federal courts are staying parallel cases pending this single ruling, making it a de facto coordinating precedent across the entire Western US (CA, OR, WA, AZ, NV, HI). The 9th Circuit ruling will set precedent for all these stayed cases simultaneously, amplifying its impact beyond the Nevada/Kalshi dispute.


## Challenging Evidence

**Source:** National Law Review analysis of 9th Circuit oral arguments, April 2026

Rule 40.11 paradox suggests even CFTC-licensed DCM platforms may not receive preemption protection if CFTC's own regulations incorporate state law restrictions. Judge Nelson's interpretation ('The language says it can't go up') indicates CFTC regulation itself may prevent listing contracts unlawful under state law, undermining the field preemption argument even for centralized registered platforms.


## Challenging Evidence

**Source:** Nevada Current, April 16 2026 oral arguments

Judge Nelson's apparent acceptance of Rule 40.11 argument ('The language says it can't go up on the platform. I don't know how you can read it differently') suggests even the DCM preemption shield may fail when CFTC's own regulation prohibits contracts unlawful under state law. This undermines the claim that DCM licensing provides reliable preemption protection.


## Supporting Evidence

**Source:** CFTC Massachusetts SJC amicus, 2026-04-24

CFTC Massachusetts SJC amicus brief explicitly scopes preemption argument to 'federally regulated exchanges' (DCM-registered platforms), with no assertion of protection for non-registered platforms. This confirms the two-tier architecture where centralized DCMs receive federal preemption defense while decentralized protocols remain outside CFTC's litigation posture.


## Supporting Evidence

**Source:** CFTC-9211-26, Arizona TRO order, April 10, 2026

U.S. District Court for the District of Arizona granted TRO on April 10, 2026, finding CFTC 'likely to succeed on the merits' of CEA preemption against Arizona gambling laws. Court explicitly limited scope to 'CFTC-regulated DCMs' and premised reasoning on 'federally registered' platform status. This is the first federal district court merits assessment confirming DCM preemption likely succeeds.


## Supporting Evidence

**Source:** U.S. District Court for the District of Arizona, CFTC-9211-26

Arizona TRO (April 10, 2026) provides first federal district court finding that CEA preemption is 'likely to succeed on the merits' against state gambling enforcement, explicitly limited to CFTC-registered DCMs. Court reasoning is predicated on platforms being 'federally regulated markets,' creating formal judicial confirmation of the two-tier structure.


## Extending Evidence

**Source:** CNBC, April 27, 2026

CFTC Chairman Selig actively supported DCM platforms expanding into perpetual futures: 'Under my leadership, the CFTC will use the tools at its disposal to onshore perpetual and other novel derivative products.' This confirms DCM preemption applies to full-spectrum derivatives exchanges, not just event contracts, further separating DCM platforms from governance markets.


## Supporting Evidence

**Source:** CoinDesk Policy, CFTC SDNY filing April 24 2026

CFTC's April 24, 2026 New York lawsuit explicitly seeks protection for 'federally regulated exchanges' and 'CFTC registrants' with no mention of on-chain protocols, decentralized governance markets, or futarchy. The complaint's framing is entirely about DCM-registered platforms (Kalshi, Coinbase, Gemini named in NY enforcement). Non-registered protocols are invisible to the CFTC in this litigation.
