CFTC Issues Dual Rules Defining Prediction Market Contracts as Swaps and Excluding Traditional Casino Gambling

In brief

• On Friday, the CFTC issued two measures: a proposed rule that expands the definition of “swap” to encompass event contracts, and an interim final rule that expressly excludes casino‑style gambling products such as sportsbooks and casino games from that definition.
• Chairman Michael Selig stated that event contracts are “commodity derivatives squarely within the CFTC’s regulatory remit” and fall under the agency’s exclusive jurisdiction, while “casino‑style gambling products are not derivatives.”
• The rules formalize proposals that the agency submitted to the White House late last month, solidifying its claim to authority amid ongoing state lawsuits and a Supreme Court dispute.

The Commodity Futures Trading Commission is reinforcing its claim over prediction markets by publishing two measures on Friday. The proposals would formally define event contracts as swaps under federal law, while explicitly carving out traditional casino‑style gambling from that classification.

The CFTC described the contracts as financial instruments “commonly known to the trade as swaps,” noting that the move eliminates any ambiguity about their regulatory status. “These products are commodity derivatives squarely within the CFTC’s regulatory remit under the Commodity Exchange Act and are within the agency’s exclusive jurisdiction,” Chairman Michael Selig said in a statement.

The second measure—an interim final rule that takes effect immediately—draws the opposite line, codifying the agency’s long‑standing view that casino‑style gambling products, such as sportsbook wagers and casino games, are excluded from the swap definition.

“Casino‑style gambling products are not derivatives,” Selig said, framing the step as a clarification of “the limits of its regulatory remit.” Both measures open a 30‑day public comment period.

Together, the two rules sharpen a crucial distinction in an ongoing jurisdictional battle. If event contracts are classified as swaps, they fall under the CFTC’s authority—an authority Selig contends is exclusive, thereby removing platforms such as Kalshi and Polymarket from state gambling regulators’ reach. Several states have sued prediction‑market operators for alleged illegal gambling, while the CFTC has filed counterclaims to protect its jurisdiction.

The filings formalize proposals that the agency submitted to the White House for review late last month, underscoring a broader strategy in which the CFTC is asserting its authority without waiting for Congressional action.

The agency has generally adopted a pro‑industry stance toward both traditional and cryptocurrency markets. It recently granted no‑action relief that permits crypto apps to offer regulated derivatives, and it has advanced separate rulemakings targeting crypto markets.

Legal uncertainty surrounding prediction markets is intensifying. A circuit split over whether event contracts constitute federally regulated swaps—exemplified by the NFL’s dispute with Kalshi—has reached the Supreme Court, indicating that the regulatory question the CFTC is now addressing may ultimately be decided by the nation’s highest court.

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