Dodd Comment Spotlights ‘Involve’ as Key Term in CFTC Prediction Market Rulemaking

The CFTC received more than 1,000 comments on its proposed rulemaking for prediction markets before the July 27 deadline. One came from former Sen. Chris Dodd, whose name appears on the Dodd-Frank Act that granted the CFTC exclusive jurisdiction over swaps.

Dodd takes issue with the agency’s definition of gaming, arguing it conflicts with how Congress used the term during debate on his namesake legislation. That letter, however, draws fresh focus to another word in the Commodity Exchange Act: “involve.” The CEA’s special rule gives the CFTC power to ban contracts that involve terrorism, war, assassination, gaming or illegal activities. As first reported by InGame, the precise meaning of “involve” could prove decisive for sports event contracts.

Courts Split on Meaning of ‘Involve’

The Ninth Circuit treated a contract involving gaming as one that itself constitutes gaming, a view that supported Nevada’s position against Kalshi. By contrast, the U.S. District Court for the District of Columbia in 2024 adopted the narrower reading now proposed by the CFTC: the underlying event that determines payout must itself be gaming. Kalshi prevailed on that definition in the election-contract case.

David Aron, special counsel at Lowenstein Sandler, told InGame he is “not sure that it should have been decided the way it was.” The CFTC’s rulemaking would codify the underlying-event test and replace an outright prohibition with a public-interest standard. Elie Mishory, now Novig chief legal officer and former Kalshi general counsel, has likewise endorsed the underlying-event approach because it keeps the focus on the subject of the trade rather than trader conduct.

Sports Contracts Sit in Legal Gray Area

Both Kalshi and the CFTC have taken inconsistent positions on whether sports qualify as gaming. In the D.C. litigation Kalshi cited sports contracts as classic examples of gaming; in its comment on the rulemaking Kalshi co-founder Luana Lopes Lara contended that sports contracts do not involve gaming. The CFTC’s proposed rules list a sports game as an example of gaming, yet its lawyers told the Ninth Circuit that only casino-style games of chance would count.

The ambiguity matters because the updated rule would give the CFTC discretionary power rather than an automatic ban. Judges weighing these questions may invoke the major questions doctrine or plain-meaning canons, producing outcomes that turn as much on perceived consequences as on statutory text. The Supreme Court is expected to take up a prediction-market case, at which point the revised CFTC rules will be squarely at issue.

Where the Risk Lies

The CFTC’s chosen definition of “involve” may limit its practical ability to block sports event contracts even if it wishes to do so. Dodd’s linkage of gaming to gambling, if accepted, could further narrow the agency’s reach. Operators and market sponsors therefore face continued regulatory uncertainty until appellate courts or the Supreme Court supply a stable interpretation.

Reporting: InGame

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