Finance · updated 1h ago · 2 min read
CFTC Proposes Defining Event Contracts as Swaps, Seeking White House Review
CFTC submitted two rules to White House to classify event contracts as swaps. One rule expands swaps to include event contracts; the other excludes casino-style products.
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CFTC targets event contracts
The U.S. Commodity Futures Trading Commission has moved to define event contracts as swaps as it seeks to clarify prediction-market jurisdiction in a dispute with state gambling regulators.
“The agency submitted both rules Monday, according to White House regulatory filings.”
The CFTC submitted two proposals to the White House for review, with one proposal treating event contracts as swaps under federal derivatives law and another excluding “casino-style gambling products” from the swap definition.
The proposals would determine whether platforms such as Polymarket and Kalshi fall under the CFTC’s exclusive federal jurisdiction over swaps traded on regulated exchanges.
The CFTC’s swap-definition push also comes after a federal appeals court rejected Kalshi’s argument that its sports contracts are swaps, a ruling that lifted an injunction preventing Tennessee from enforcing its gambling laws.
The CFTC’s approach is framed as a way to resolve regulatory ambiguity by placing event contracts within the federal swap framework while carving out casino-style gambling products.
States contest federal reach
State regulators have disputed the CFTC’s interpretation, arguing that event contracts tied to sporting outcomes are gambling rather than financial products and should be governed by state gambling laws. The dispute has produced conflicting federal appellate rulings, with the Third Circuit siding with Kalshi in New Jersey in April while the Sixth Circuit ruled against Kalshi’s sports-event contracts. The Sixth Circuit ruled Friday that Kalshi’s sports-event contracts do not qualify as swaps because the sporting events underneath them are not inherently financial or economic.
The Sixth Circuit also held that even if Kalshi’s contracts were swaps, federal commodities law would not preempt Ohio’s or Tennessee’s gambling laws. The CFTC Chairman Michael Selig has repeatedly argued that prediction markets, including the sports contracts at the center of Kalshi’s state battles, fall under the agency’s exclusive jurisdiction.
White House review and fallout
The White House is reviewing the CFTC’s two rules through the Office of Management and Budget’s Office of Information and Regulatory Affairs, where the proposals are expected to be a step toward public comment for the swap-definition rule. The CFTC’s interim final rule to exclude “casino-style gambling products” is described as potentially taking effect sooner than the event-contract rule, which would first go through public comment. Daniel Wallach warned that if the interim rule goes beyond excluding casino-style products and provides tacit authorization for sports-event contracts, it could prompt immediate APA litigation in federal court.
“The event-contract rule would first go through public comment.”
The CFTC’s filings also arrive as the Supreme Court question remains open, with multiple sources describing a split among appellate courts and the possibility of Supreme Court review. The outcome of the CFTC’s swap classification could reshape how lawsuits proceed against prediction market companies, because the rules are designed to sever event contracts from gambling and strengthen the CFTC’s jurisdictional position.