The Commodity Futures Trading Commission has published an interim final rule that excludes casino-style gambling products, including sportsbooks and casino games, from the regulatory definition of swaps.
According to the CFTC, casino-style gambling products do not qualify as derivatives and fall outside the agency's regulatory remit. CFTC Chairman Michael S. Selig stated that the rule provides clarity on the limits of the Commission's authority, consistent with how the CFTC has historically deferred to state regulators on other products.
Simultaneously, the CFTC released a notice of proposed rulemaking to expressly include event contracts based on sports, politics, cultural, and weather-related events within the swap definition. The proposal seeks to clarify the regulatory treatment of these contracts and eliminate ambiguity surrounding their classification.
Event contracts, which are commonly used by Americans to hedge risks and speculate on future outcomes, would be classified as commodity derivatives under the CFTC's exclusive jurisdiction if the proposal is finalized. The agency argues these financial instruments fall squarely within its regulatory authority under the Commodity Exchange Act.
The proposed classification has implications for prediction-market platforms such as Kalshi and Polymarket, which would potentially fall under federal CFTC oversight rather than state gambling regulations. Several states have filed lawsuits against prediction-market operators alleging illegal gambling, prompting the CFTC to initiate legal action to defend its regulatory authority over these platforms.
