CFTC proposes treating event contracts as swaps, excludes sportsbook and casino wagers
In brief
- CFTC announced two actions on Oct. 9 separating prediction-market contracts from traditional gambling.
- Proposal would expressly include sports and other event contracts in the swap definition.
- Separate interim final rule codifies the exclusion of sportsbook and casino wagers.
- Effective dates and comment deadlines aren't set; no Federal Register date was given.
- Sixth Circuit's Sept. 25 Kalshi ruling left state gambling-law questions unresolved.
What the CFTC proposed
The event-contract proposal covers sports, politics, cultural events and weather-related outcomes, CryptoSlate reported. CFTC Chairman Michael S. Selig said these products fall within the agency's exclusive jurisdiction under the Commodity Exchange Act.
The mechanics are simple. According to the CFTC's explanation, event contracts often let traders buy yes-or-no positions on a future outcome with a fixed payout (usually $1), their value depends on that outcome, and they can be used to hedge risk or speculate.
It's not final, though. The CFTC is seeking written comments through Regulations.gov within 30 days of the proposal's publication in the Federal Register.
The casino carve-out
The second action draws the line from the other side. The agency described the interim final rule as codifying its longstanding position that casino-style gambling products (including sportsbook and casino game wagers) fall outside the swap definition. According to the CFTC, that exclusion takes effect immediately upon publication in the Federal Register, and it carries its own 30-day comment window tied to that publication.
Timing is the open question.
Neither announcement specified a Federal Register publication date, so Oct. 9 doesn't establish an effective date or a comment deadline for either action.
The state-law fight isn't settled
Classification is one issue. Whether federal regulation displaces state gambling laws is a separate legal question, per CryptoSlate's account, and the CFTC's position doesn't answer it.
In a Sept. 25 ruling on preliminary-injunction appeals involving prediction-market operator Kalshi, the Sixth Circuit held, according to CryptoSlate, that the company hadn't shown its sports-event contracts met the statutory swap definition. The court also held, in the alternative, that even assuming the contracts were swaps, the Commodity Exchange Act didn't expressly or impliedly preempt Ohio's or Tennessee's gambling laws.
Critics aren't sold on the agency's framing either. In an Oct. 9 statement, Better Markets securities-policy director Benjamin Schiffrin argued that sports event contracts enable sports betting and should remain subject to state gambling laws.
That leaves Kalshi and other event-contract venues with a federal proposal on one side and, in Ohio and Tennessee, an appellate ruling on the other.
Frequently asked questions
What did the CFTC announce on Oct. 9 about prediction markets?
The CFTC announced two actions. It proposed expressly including sports and other event contracts in the definition of a swap, and it announced a separate interim final rule to codify the exclusion of sportsbook and casino wagers.
Is the CFTC's event-contract proposal final?
No. The proposed inclusion isn't final, and the CFTC is seeking written comments through Regulations.gov within 30 days of the proposal's publication in the Federal Register. Neither announcement gave a publication date, so no comment deadline has been set yet.
How do event contracts work, according to the CFTC?
The CFTC explained that event contracts often let traders buy yes-or-no positions on a future outcome with a fixed payout, usually $1. Their value depends on that outcome, and they can be used to hedge risk or speculate.
What did the Sixth Circuit decide in the Kalshi case?
According to CryptoSlate's account, in a Sept. 25 ruling on preliminary-injunction appeals, the Sixth Circuit held that Kalshi hadn't shown its sports-event contracts met the statutory swap definition. Alternatively, it held that even if they were swaps, the Commodity Exchange Act didn't expressly or impliedly preempt Ohio's or Tennessee's gambling laws.
