CFTC seeks to define event contracts as swaps amid prediction market fight
The Commodity Futures Trading Commission has submitted a proposed rule to broaden the definition of "swap" to explicitly cover event contracts and an interim final rule to exempt casino-style gambling, both items appearing on an OIRA docket and currently under review. The move is part of a jurisdictional dispute with state gambling regulators over whether prediction-market event contracts fall under federal swap rules or state gambling laws.
Why It Matters
If event contracts are defined as swaps, the CFTC would bolster its claim to exclusive federal jurisdiction over those products when offered on its regulated exchanges, potentially preempting state gambling enforcement. That outcome would affect operators of regulated prediction markets such as Polymarket and Kalshi, which have been at the center of the dispute.
Key Facts
- Agency: U.S. Commodity Futures Trading Commission (CFTC)
- Action: Submitted proposed rule to expand definition of "swap" to include event contracts
- Related action: Submitted interim final rule to exclude casino-style gambling products
- Administrative docket: Items listed with the Office of Information and Regulatory Affairs (OIRA) and under review
- Dispute: CFTC asserts federal exclusivity over swaps on its regulated exchanges; state regulators contest this for sports event contracts (
The U.S. Commodity Futures Trading Commission has taken formal steps to alter how the term "swap" is defined, filing a proposed rule that would bring event contracts within that statutory category. The filings also include an interim final rule intended to make clear that casino-style gambling products are not covered by the agency's swap definition. Both actions appear on an OIRA docket and are currently under regulatory review.
The proposed definitional change is tied to an ongoing jurisdictional conflict between the CFTC and state gambling authorities. The CFTC contends that federal law grants it exclusive authority over swaps traded on exchanges it regulates — a category the agency says includes event contracts offered by platforms such as Polymarket and Kalshi. State regulators, particularly those overseeing gaming and gambling, have pushed back, arguing that certain event contracts, notably those based on sports outcomes, fall under state gambling statutes.
By classifying event contracts as swaps, the CFTC would strengthen its legal position that such contracts sold on regulated exchanges fall within federal oversight and preempt state law in those contexts. The interim rule excluding casino-style gambling suggests the agency is seeking to draw a line between traditional gambling products and the event-based contracts it aims to regulate as swaps.
The regulatory filings come amid recent litigation involving market operators: a separate note in the docket references Kalshi's loss on appeal, a decision that could escalate the dispute to higher courts. For market operators, rules that assign event contracts to the CFTC's swap regime would have immediate implications for compliance, reporting, and where regulatory authority rests.
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