<div> Prediction market companies such as Kalshi and Polymarket have recently burst onto the scene and begun selling contracts that allow buyers to predict the outcome of events such as sports games and political elections. By structuring these contracts as financial instruments, prediction market companies seek to overturn the traditional regulatory framework for sports betting. Instead of being supervised by state gaming commissions, prediction contracts on sports events would be federally regulated as “swaps” under the Commodity Futures Trading Commission (CFTC). Such a jurisdictional leap intentionally carries dramatic implications for how sports gaming contracts are taxed and licensed, and for what consumer protection rules are in place with respect to the end-users, sports bettors. </div> <div> <br> </div> <div> This article presents an early analysis of this emerging phenomenon, which represents one of the most ambitious attempts at regulatory arbitrage in recent memory for any industry. In doing so, it clarifies issues that will be critical for evaluating the appropriate regulatory framework going forward. These include: (a) a comparison of the sports gaming industry with prediction markets (b) the comparative advantages of state gaming commissions versus federal regulators at the CFTC; and (c) an overview of the current caselaw, which has been thrown into uncertainty by a growing federal court split. </div> <div> Ultimately, this article suggests a cautious approach that allows room for concurrent state and federal regulation of sports prediction contracts, at least initially. By allowing a temporary phase of jurisdictional competition, state and federal regulators will be incentivized to provide credible solutions to the novel problems posed by sports prediction contracts. Policymakers will also have time to gather empirical data on the relative performance of each regulatory structure. </div>