The U.S. Commodity Futures Trading Commission has submitted two prediction-market rules to the White House for review as it seeks to clarify federal authority over event contracts. The filings arrive amid ongoing legal disputes between federal regulators and states over whether sports-based prediction contracts should be classified as derivatives or gambling products.
The Office of Management and Budget received both measures on September 28. One proposed rule would classify event contracts within the federal definition of swaps under derivatives law. The second, structured as an interim final rule, would exclude casino-style gambling products from that same classification.
The submissions do not yet include full rule text, and the OMB has not categorized either action as economically significant. The CFTC initiated its prediction-market rulemaking process in March and solicited public comment on how federal derivatives law should treat sports, election, and other outcome-based contracts.
Federal Courts Reach Conflicting Conclusions
Recent court decisions have deepened uncertainty about regulatory jurisdiction. On September 25, the Sixth Circuit Court of Appeals ruled that Kalshi's sports-event contracts do not qualify as swaps under the Commodity Exchange Act, and found that federal law does not prevent Ohio and Tennessee from applying their own gambling statutes to such contracts.
That ruling contradicts an April decision by the Third Circuit Court of Appeals involving New Jersey. The Third Circuit determined that Kalshi's sports contracts constituted swaps on a federally regulated market and supported CFTC jurisdiction. The circuit split has increased the likelihood that the Supreme Court may eventually review the issue.
CFTC Asserts Exclusive Authority
The CFTC has consistently maintained that it holds exclusive authority over federally regulated prediction markets. Chairman Michael Selig has defended that position in lawsuits and court filings involving multiple states. The agency has also broadened its regulatory work across digital markets, including updates to guidance covering tokenized assets and blockchain records.
Prediction markets have expanded across multiple platforms in recent years. Any final rule will take effect within an unsettled legal landscape, where federal appeals courts hold different positions on derivatives classification and the proper allocation of authority between federal and state regulators.
