---
type: source
title: "Holland & Knight: Federal Appeals Court CFTC Jurisdiction Over Sports Event Contracts Likely Exclusive — DCM Registration Required"
author: "Holland & Knight LLP"
url: https://www.hklaw.com/en/insights/publications/2026/04/federal-appeals-court-cftc-jurisdiction-over-sports-event-contracts
date: 2026-04-07
domain: internet-finance
secondary_domains: []
format: legal-analysis
status: processed
processed_by: rio
processed_date: 2026-05-05
priority: high
tags: [Third-Circuit, Kalshi, preemption, DCM, swap-classification, CEA, sports-event-contracts, CFTC, KalshiEX-v-Flaherty]
intake_tier: research-task
extraction_model: "anthropic/claude-sonnet-4.5"
---

## Content

Holland & Knight analysis of the Third Circuit ruling in KalshiEX LLC v. Flaherty (April 6, 2026):

**Key holding on DCM registration:** The court carefully defined the preempted field as **"regulation of trading on a DCM"** — not "all gambling regulation broadly." The opinion states that Kalshi operates "a registered DCM under the exclusive jurisdiction of the CFTC." Without federal registration as a designated contract market, the preemption framework does not apply.

**Swap classification:** Kalshi's sports event contracts qualify as "swaps" under the CEA because they involve payments "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." The majority rejected New Jersey's standard, finding only "association" with economic consequence is required — sports outcomes financially impact sponsors, broadcasters, and franchises.

**What the ruling does NOT address:** The opinion does not address non-sports prediction market contracts. Analysis focuses exclusively on sports-related event contracts.

**DCM requirement is explicit:** "Without federal registration as a designated contract market, the preemption framework would not apply."

**Dissent (Judge Roth):** Contracts "virtually indistinguishable from betting products available on online sportsbooks." Dissent also invoked CFTC Rule 40.11(a)(1) paradox: CFTC prohibits DCMs from listing gaming contracts — if CFTC isn't claiming jurisdiction over gaming products, the preemption argument for gaming-adjacent contracts is undermined.

## Agent Notes

**Why this matters:** This is the sourcing document for the critical Session 36 analytical correction. Sessions 35-36 identified that the Third Circuit "swaps" classification is NOT affirmative protection for non-DCM MetaDAO — it requires DCM registration. Holland & Knight's direct quote from the opinion confirms this: "Without federal registration as a designated contract market, the preemption framework would not apply."

**What surprised me:** How explicitly the Third Circuit scoped its holding to DCM-registered entities. This is not an ambiguous reading — the court literally defined the preempted field as "regulation of trading on a DCM." Session 35's error (calling this "affirmative protection for MetaDAO") was based on reading the "swaps" classification as universal protection, when the court's holding is jurisdictionally specific to DCMs.

**What I expected but didn't find:** Any analysis of how the ruling applies to non-DCM prediction market platforms. The entire legal discourse assumes DCM registration as the baseline. Non-DCM platforms are not considered in any analysis I've found.

**KB connections:**
- metadao-conditional-governance-markets-may-fall-outside-cftc-event-contract-definition-because-twap-settlement-against-internal-token-price-is-endogenous-not-an-external-observable-event — URGENT UPDATE NEEDED: This claim's body mentions the "swap" alternative classification at line 51. It needs explicit language that "swaps" classification for non-DCM MetaDAO creates greater regulatory risk (unregistered swaps = CEA violation), not lesser. The H&K quote provides the sourcing.
- [[futarchy-governed entities are structurally not securities because prediction market participation replaces the concentrated promoter effort that the Howey test requires]] — the broader regulatory argument that doesn't depend on DCM preemption

**Extraction hints:**
- TWAP endogeneity claim update: Add Holland & Knight quote ("Without federal registration as a designated contract market, the preemption framework would not apply") as direct sourcing for the Session 36 correction to the "swaps" alternative classification section.
- Potential stand-alone claim: "MetaDAO governance markets cannot benefit from Third Circuit swap preemption because the ruling's field is explicitly 'regulation of trading on a DCM' and MetaDAO is not a registered DCM." This would be the direct, sourced claim that corrects the Session 35 error.

**Context:** Holland & Knight is one of the primary prediction market regulatory law firms (has published multiple analyses in the prediction market litigation series). Published April 7 — day after the Third Circuit ruling. Has a February 2026 companion article ("Prediction Markets at a Crossroads: The Continued Jurisdictional Battle") that covers the earlier litigation landscape.

## Curator Notes (structured handoff for extractor)

PRIMARY CONNECTION: metadao-conditional-governance-markets-may-fall-outside-cftc-event-contract-definition-because-twap-settlement-against-internal-token-price-is-endogenous-not-an-external-observable-event

WHY ARCHIVED: This is the sourcing document for the critical Session 35-36 analytical correction. The Holland & Knight direct quote definitively establishes that Third Circuit preemption requires DCM registration, and MetaDAO's non-DCM status means the "swaps" classification creates risk, not protection.

EXTRACTION HINT: The primary task is updating the existing TWAP endogeneity claim's "alternative classification — conditional forward" section to explicitly address the double-edged risk for non-DCM entities, sourced from this H&K analysis.
