CFTC moves to fold event contracts into swaps rules

The Commodity Futures Trading Commission split its prediction-market policy in two on Friday, Oct. 9: casino-style gambling is now expressly outside the definition of a swap, while event contracts on sports, politics, culture and weather would be folded into the swaps rulebook.

The agency issued an interim final rule that takes effect immediately, carving sportsbook and casino wagers out of the swap definition. Interim final rules become policy on publication but stay open for public comment as they are implemented. The CFTC described the exclusion as codifying its longstanding position that casino-style products are not derivatives.

The companion measure is only a proposal. It would place event contracts, the products traded on Kalshi and Polymarket US, inside the swaps definition the agency already administers. A notice of proposed rulemaking carries a 30-day comment window before it can become final.

Chairman Michael S. Selig described event contracts as commodity derivatives within the agency’s exclusive jurisdiction under the Commodity Exchange Act, and said the proposal would resolve classification ambiguity. He said casino-style gambling products are not derivatives and framed the exclusion as a clarification of the limits of CFTC authority over state-regulated activities.

The twin rulemakings arrive amid lawsuits from several states, which claim authority over sports betting on the platforms and accuse them of running illegal gambling operations. States and former federal officials submitted views to the U.S. Supreme Court this week asking it to resolve the dispute; federal appellate rulings have split, with one decision opposing the states and two supporting them.

The proposal would not automatically resolve those court disputes. Selig is the lone commissioner on what is meant to be a five-member commission and can set policy alone.

The Commodity Futures Trading Commission split its prediction-market policy in two on Friday, Oct. 9: casino-style gambling is now expressly outside the definition of a swap, while event contracts on sports, politics, culture and weather would be folded into the swaps rulebook.

The agency issued an interim final rule that takes effect immediately, carving sportsbook and casino wagers out of the swap definition. Interim final rules become policy on publication but stay open for public comment as they are implemented. The CFTC described the exclusion as codifying its longstanding position that casino-style products are not derivatives.

The companion measure is only a proposal. It would place event contracts, the products traded on Kalshi and Polymarket US, inside the swaps definition the agency already administers. A notice of proposed rulemaking carries a 30-day comment window before it can become final.

Chairman Michael S. Selig described event contracts as commodity derivatives within the agency’s exclusive jurisdiction under the Commodity Exchange Act, and said the proposal would resolve classification ambiguity. He said casino-style gambling products are not derivatives and framed the exclusion as a clarification of the limits of CFTC authority over state-regulated activities.

The twin rulemakings arrive amid lawsuits from several states, which claim authority over sports betting on the platforms and accuse them of running illegal gambling operations. States and former federal officials submitted views to the U.S. Supreme Court this week asking it to resolve the dispute; federal appellate rulings have split, with one decision opposing the states and two supporting them.

The proposal would not automatically resolve those court disputes. Selig is the lone commissioner on what is meant to be a five-member commission and can set policy alone.