Court Rules Crypto.com Sports Contracts Are Not Protected Swaps

Event Versus Outcome

The central legal issue was the precise definition of a “swap” under the Commodity Exchange Act (CEA). Crypto.com and similar prediction market platforms argued that their contracts, which are based on whether an athlete or team achieves a certain outcome, met the federal standard.

However, Judge Gordon determined that sporting event contracts based on the result of a live game are not covered by the federal definition.

The CEA requires the instrument to depend on the “occurrence, nonoccurrence, or the extent of the occurrence of an event.” The judge argued that the outcome of an event, such as who wins the Kentucky Derby, is fundamentally different from the occurrence of the event itself.

Relying on an outcome, rather than the event taking place, is an archaic interpretation of the word “event.” Losing the statutory status of a swap instantly invalidated the company’s federal preemption claim over Nevada’s ability to regulate gambling.

Preventing a Shift in Market Control

Judge Gordon further reasoned that approving Crypto.com’s position would cause a massive, unintended regulatory shift. He warned that accepting the company’s reading of the law would pull nearly all sports wagering into the exclusive jurisdiction of the federal CFTC.

This would force all traditional sports bets to occur on designated contract exchanges rather than at state-licensed casinos.

The court stated that Congress did not intend for gambling to move onto federally regulated exchanges when drafting the CEA. In fact, a current CFTC regulation forbids exchanges from offering contracts that involve “gaming.”

Therefore, denying the injunction was deemed to be in the public interest. The ruling supports the NGCB and upholds Nevada’s historical authority to ensure unlicensed sports wagering, even if masked as a financial instrument, does not occur within its borders.