U.S. CFTC seeks event contract definitions that may defy states' gambling claims
The U.S. Commodity Futures Trading Commission has sent two rules to the White House seeking to classify prediction-market event contracts as swaps and to exclude "casino-style gambling products" from being part of swaps. The submissions, sent to the Office of Management and Budget on Sept. 28, aim to clarify federal oversight amid conflicting federal court rulings and state lawsuits over whether sports-tied event contracts constitute gambling.
Why It Matters
If finalized, the rules would strengthen the CFTC's claim to exclusive regulatory authority over prediction markets and could undercut state-level gambling challenges against platforms such as Kalshi. The agency's moves come against a backdrop of split federal appellate decisions and ongoing litigation over jurisdiction in this market space.
Key Facts
- Agency: U.S. Commodity Futures Trading Commission (CFTC)
- Action: Submitted two rules to the White House Office of Management and Budget (OMB) for review
- Date of OMB filing: September 28 (year per source)
- Rule 1: Propose extending the regulatory definition of "swaps" to include event contracts
- Rule 2: Interim final rule to remove "casino-style gambling products" from what can constitute a swap (i.e., say event contracts are not gambling)
The Commodity Futures Trading Commission has moved to more clearly place prediction-market event contracts under its regulatory umbrella by submitting two related rule actions to the White House's Office of Management and Budget. One proposed rule would expressly expand the CFTC's statutory definition of swaps to encompass event contracts — often binary yes/no wagers on outcomes such as sporting results or elections. A related interim final rule would declare that casino-style gambling products cannot be treated as swaps, severing event contracts from gambling characterizations. The filings, dated Sept. 28, mark another step in the agency's broader effort to assert exclusive federal oversight of prediction markets and to resist state-level attempts to regulate or shut down such platforms. The CFTC has engaged in litigation both defending that jurisdiction and countering state claims that sports-linked contracts offered by firms like Kalshi amount to illegal gambling under state law. The regulatory push arrives amid conflicting federal appellate court decisions. The U.S. Sixth Circuit and the Eighth Circuit recently ruled that sports-related contracts on Kalshi are not swaps and are subject to state gambling regulation, while the Third Circuit reached the opposite conclusion, finding the CFTC has jurisdiction. Those divergent rulings have left the legal status of event contracts unsettled and increased the likelihood that the dispute could reach the U.S. Supreme Court. The CFTC's OMB disclosures did not include full rule text but characterized both actions as not "economically significant." The agency also noted a separate "prerule" submission on crypto rulemaking. Operationally, the CFTC currently has a single commissioner, Chair Mike Selig, who has been acting alone because the White House has not nominated additional commissioners. If the CFTC finalizes a definition treating event contracts as swaps and excluding gambling products from swaps, it would directly challenge the legal basis for multiple state lawsuits alleging prediction-market firms operate unlawful gambling platforms.
Keep Reading
