The Commodity Futures Trading Commission issued two measures Friday to establish its regulatory authority over prediction markets while formally excluding traditional gambling products from its jurisdiction.
The first measure, a proposed rule open for public comment, expands the definition of "swap" under federal law to explicitly include event contracts tied to sports, politics, cultural events, and weather. The CFTC characterized these contracts as financial instruments and commodity derivatives that fall squarely within the agency's regulatory authority and exclusive jurisdiction under the Commodity Exchange Act.
"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," CFTC Chairman Michael Selig said in a statement.
The second measure, an interim final rule that takes effect immediately upon publication, codifies the CFTC's longstanding position that casino-style gambling products—including sportsbook wagers and casino games—are excluded from the swap definition and fall outside the agency's regulatory scope.
"Casino-style gambling products are not derivatives," Selig said, describing the action as clarifying the limits of the CFTC's regulatory authority. Both rules carry 30-day comment windows.
The distinction addresses a central question in an ongoing jurisdictional dispute between federal regulators and state authorities. If event contracts qualify as federally regulated swaps, they would fall under CFTC authority rather than state gambling regulators. Multiple states have sued prediction-market operators alleging illegal gambling, while the CFTC has filed countersuits to defend its jurisdiction.
The rules formalize proposals the agency submitted to the White House for review last month as part of a broader effort to assert regulatory authority over prediction markets. A legal split over whether event contracts qualify as federally regulated swaps has also drawn Supreme Court attention, meaning the question the CFTC is attempting to resolve through regulation may ultimately be decided by the justices.
