The U.S. Commodity Futures Trading Commission has submitted two related rules to the White House Office of Management and Budget seeking to formally classify event contracts traded on prediction markets as "swaps" and explicitly separate them from gambling regulations.
The move intensifies an ongoing dispute between the CFTC and states over regulatory authority. Event contracts are generally binary yes-or-no bets on measurable outcomes such as sporting events and elections, and are traded on platforms including Kalshi, Polymarket, Crypto.com, and Robinhood.
Competing Legal Rulings
The proposed rules come amid conflicting federal court decisions on the matter. The U.S. Sixth Circuit Court of Appeals and the Eighth Circuit Court of Appeals both recently ruled that sports-tied contracts on Kalshi are not swaps and are subject to state gambling regulations. However, the Third Circuit Court of Appeals previously decided that the CFTC has proper jurisdiction over prediction markets, creating a legal rift at the federal level.
CFTC's Regulatory Strategy
The CFTC's submission includes one rule that would extend the regulatory definition of swaps to include event contracts, and an "interim final rule" that would remove "casino-style gambling products" from the definition of swaps. The interim final rule would take effect immediately while remaining open for public input and revision.
If event contracts are classified as swaps and determined not to be gambling products, the outcome could undermine states' legal positions in lawsuits against prediction market companies, primarily targeting Kalshi, that allege illegal gambling operations.
CFTC Chairman Mike Selig has argued that the agency holds sole jurisdiction over prediction markets and has actively engaged in litigation defending that position against state-level challenges. The agency declared both rules as not being "economically significant" in its OMB submission dated September 28.
The CFTC is currently operating with only one commissioner, as President Donald Trump has not yet nominated additional commissioners, leaving Selig to act unilaterally on regulatory and policy decisions.
