CFTC Draws the Line Between Prediction Markets and Gambling in New Rules
The CFTC proposed rules defining event contracts as swaps while excluding casino-style gambling from that definition.Summary
The Commodity Futures Trading Commission (CFTC) issued two measures Friday that draw a regulatory line between prediction markets and traditional gambling. The first, a proposed rule open for public comment, would explicitly expand the definition of “swap” to include event contracts tied to sports, politics, cultural events and weather, resolving ambiguity about their status under federal law. Chairman Michael Selig said 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.” The second, an interim final rule effective immediately, codifies the agency’s view that casino-style gambling products, including sportsbook wagers and casino games, are not derivatives and are excluded from the swap definition. Both measures carry 30-day comment windows.
The rules formalize proposals sent to the White House last month and sharpen a jurisdictional fight over prediction markets. If event contracts qualify as swaps, they fall under the CFTC’s exclusive authority, placing platforms like Kalshi and Polymarket beyond the reach of state gambling regulators. Multiple states have sued prediction-market operators alleging illegal gambling, and the CFTC has countersued to defend its turf.
CFTC Chairman Michael Selig framed the steps as clarifying the limits of the agency’s regulatory remit. The agency has broadly taken a pro-industry approach toward both traditional and cryptocurrency markets, recently issuing no-action relief letting crypto apps offer regulated derivatives and advancing separate crypto-markets rulemakings. The legal stakes are climbing: a court split over whether event contracts qualify as federally regulated swaps, involving the NFL and others against Kalshi, has drawn the Supreme Court’s attention, meaning the question the CFTC is now trying to settle through regulation may ultimately be decided by the justices.
(Source：Decrypt)