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U.S. Circuit Judge Ryan Nelson bluntly rejected Crypto.com attorney Shay Dvoretzky’s argument that exchange-traded contracts differ in substance from sportsbook wagers
"You’re still setting odds and betting on outcomes… I don’t understand how you can say those are different"
The United States Court of Appeals for the Ninth Circuit judges expressed skepticism that sports-based event contracts differ meaningfully from traditional betting during April 16 oral arguments in a consolidated case involving North American Derivatives Exchange Inc. (Crypto.com), Robinhood, and Kalshi against Nevada.
U.S. Circuit Judge Ryan Nelson bluntly rejected Crypto.com attorney Shay Dvoretzky’s argument that exchange-traded contracts differ in substance from sportsbook wagers:
"This is sophistry to the nth degree… It’s still the house.”
When counsel argued that event contracts operate through market mechanisms rather than bookmaker odds, Nelson pushed back:
"You’re still setting odds and betting on outcomes… I don’t understand how you can say those are different.”
Nelson stopped him to read Rule 40.11, saying, “That is not… what 40.11 says.” He pointed to the recent Third Circuit ruling in favor of Kalshi, saying the court’s interpretation of the rule was a fundamental problem.
He read out loud: "A registered entity shall not list for trading or except through clearing any of the following… terrorism, assassination, war, gaming.”
Attorney Nicole Saharsky, representing Nevada, warned against the dramatic expansion of federal power.
"What plaintiffs… are urging is a severe intrusion on state sovereignty… making the CFTC the nation’s gaming regulator.”
The state argued that, taken to its logical conclusion, the approach would sweep in all sports betting:
"All sports bets would qualify as swaps.”
“Swaps” are basically financial contracts that pay out based on whether an event happens.
Prediction market attorneys argued that the CEA’s definition of swaps clearly covers event-based contracts. Dvoretzky opened the hearing by saying:
"The Dodd-Frank Act defines swaps broadly to include contracts where payment turns on the occurrence… of an event associated with a potential financial… consequence.”
However, the court questioned whether that interpretation extends too far into territory historically regulated by the states. Nelson asked:
"Is there any suggestion that in Dodd Frank, in 2010… that they intended to transfer jurisdiction over sports gaming… away from the states to the CFTC?”
- Gilbert Horowitz, Gambling911.com
