CFTC moves to define event contracts as swaps, carves out casino-style gambling
In brief
- CFTC proposed rule would define event contracts on sports, politics, culture and weather as swaps.
- Interim final rule, effective on publication, excludes sportsbook wagers and casino games from the swap definition.
- Both measures carry 30-day comment windows, Decrypt reported.
- Chairman Michael Selig argues the CFTC's jurisdiction over these products is exclusive.
- Kalshi and NFL court split has drawn the Supreme Court's attention.
Two rules, opposite lines
The first measure is a proposed rule opened for public comment that would expand the definition of "swap" to include event contracts tied to sports, politics, cultural events and weather. It isn't final yet. The CFTC said the contracts are financial instruments "commonly known to the trade as swaps" and that the move resolves any ambiguity about their status.
The second measure goes the other way. It's an interim final rule, effective immediately upon publication, that codifies the agency's longstanding view that casino-style gambling products (sportsbook wagers and casino games included) fall outside the swap definition. Both measures carry 30-day comment windows, according to Decrypt.
“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.
Selig also said casino-style gambling products aren't derivatives, and he described the step as clarifying the limits of the agency's regulatory remit.
Why jurisdiction is the real fight
The fight is over who gets to regulate. If event contracts are swaps, they fall under CFTC authority, which Selig has argued is exclusive. That would place platforms such as Kalshi and Polymarket outside the reach of state gambling regulators.
That's still the agency's position, not settled law.
States haven't stayed quiet. Multiple states have sued prediction-market operators alleging illegal gambling, and the CFTC has countersued.
A broader push, and a court split
The filings formalize proposals the CFTC had sent to the White House for review late the previous month, Decrypt reported. They're part of a broader push in which the agency has asserted its authority rather than waiting on Congress. Decrypt described the CFTC as having broadly taken a pro-industry approach toward both traditional and crypto markets. It recently issued no-action relief letting crypto apps offer regulated derivatives, and it has advanced separate crypto-market rulemakings.
The rules might not be the last word, though. A court split over whether event contracts qualify as federally regulated swaps, pitting the NFL and others against Kalshi, has drawn the Supreme Court's attention. According to Decrypt, the question the CFTC is trying to settle through regulation may ultimately be decided by the justices.
Frequently asked questions
What did the CFTC propose about prediction-market event contracts?
The CFTC issued a proposed rule, open for public comment, that would expand the definition of swap to include event contracts tied to sports, politics, cultural events and weather. The agency said these contracts are financial instruments commonly known to the trade as swaps.
Does the CFTC treat sportsbook bets and casino games as swaps?
No. An interim final rule, effective immediately upon publication, codified the agency's longstanding view that casino-style gambling products, including sportsbook wagers and casino games, are excluded from the swap definition. Chairman Michael Selig said casino-style gambling products are not derivatives.
Why does classifying event contracts as swaps matter for Kalshi and Polymarket?
If event contracts are swaps, they fall under CFTC authority, which Selig has argued is exclusive. That would place platforms such as Kalshi and Polymarket outside the reach of state gambling regulators. Multiple states have sued prediction-market operators alleging illegal gambling, and the CFTC has countersued.
Could the Supreme Court decide whether event contracts are swaps?
A court split over whether event contracts qualify as federally regulated swaps, pitting the NFL and others against Kalshi, has drawn the Supreme Court's attention, according to Decrypt. The question the CFTC is trying to settle through regulation may ultimately be decided by the justices.
