CFTC Issues New Rules to Separate Prediction Markets from Casino-Style Gambling
The CFTC proposed bringing event contracts under swap rules while issuing an interim rule excluding casino-style gambling.Summary
The U.S. Commodity Futures Trading Commission (CFTC) is moving to clarify its authority over prediction markets by changing how federal rules define event contracts. The agency published a notice of proposed rulemaking on Friday seeking to expressly include event contracts tied to sports, politics, cultural events, and weather outcomes within the legal definition of swaps, which would bring platforms such as Kalshi and Polymarket under existing federal regulation. Chairman Michael S. Selig said these commodity derivatives fall squarely within the CFTC's exclusive jurisdiction under the Commodity Exchange Act. Public comments will be accepted for 30 days after publication in the Federal Register. Alongside this proposal, the CFTC issued an interim final rule that takes effect immediately, excluding casino-style gambling from the swap definition and addressing concerns that its interpretation could extend federal derivatives rules to state-regulated casinos and sportsbooks. TD Cowen analyst Jaret Seiberg said the interim rule is designed to improve the agency's position in court, where several states are arguing that the CFTC's swap definition would make federally illegal any wager made at a state or tribal casino or sportsbook, though he questioned whether it would succeed. Several states have sued over sports-related prediction market contracts, accusing platforms of illegal gambling, while the CFTC maintains exclusive federal authority. Court rulings have been mixed, and the dispute has reached the U.S. Supreme Court. The rulemaking also occurs while Selig leads the CFTC as its sole commissioner, as the Trump administration has not appointed additional commissioners. The new rules do not resolve ongoing litigation or guarantee judicial acceptance, and the outcome will depend on public comments and the lawsuits.
(Source：Analytics And Insight)