CFTC Proposes Swap Rules for Event Contracts While Excluding Casino Gambling

WASHINGTON – The Commodity Futures Trading Commission (CFTC) released two measures on October 9 to distinguish prediction-market event contracts from casino-style gambling. The move could affect which regulators oversee sports-related prediction markets as states challenge the agency’s claim of exclusive federal authority.

One measure proposes explicitly including event contracts within the federal definition of a swap, while the other excludes traditional sportsbook wagers and casino games. The distinction places the CFTC’s position into a formal rulemaking process as competing interpretations of federal and state gambling laws move through the courts.

CFTC Proposes Classifying Event Contracts as Swaps

Under its notice of proposed rulemaking, the commission seeks to clarify that event contracts tied to sports, politics, cultural events and weather fall within the definition of swaps under the Commodity Exchange Act. The agency maintains that these financial instruments are commonly recognized as swaps and that an explicit definition would resolve uncertainty about their regulatory status.

CFTC Chairman Michael S. Selig has argued that event contracts are commodity derivatives subject to the agency’s exclusive jurisdiction. Formalizing that interpretation could strengthen the commission’s position in disputes involving federally regulated prediction-market exchanges, although the proposed rule would not itself resolve pending litigation over state gambling authority.

The second measure, an interim final rule, excludes casino-style gambling products from the swap definition. It covers conventional sportsbook wagers and casino games, which the agency says fall outside its derivatives oversight.

“Casino-style gambling products are not derivatives,” Selig said in announcing the exclusion. The rule is set to take effect immediately upon publication in the Federal Register, establishing a different regulatory treatment for conventional gambling products and qualifying event contracts.

States Challenge Federal Control of Sports Prediction Markets

The distinction comes amid legal challenges involving Kalshi and state gambling regulators. Prediction-market operators argue that contracts traded on CFTC-regulated exchanges fall under federal commodities law, while states maintain that sports-related contracts can constitute gambling subject to licensing and consumer-protection requirements.

Federal appeals courts have reached different conclusions. The Third Circuit backed Kalshi’s position in a preliminary-injunction dispute involving New Jersey, while the Ninth Circuit subsequently rejected Kalshi’s federal preemption argument in Nevada. Both decisions concerned preliminary relief rather than final judgments on the underlying legal claims.

The dispute has also divided tribal gaming interests. Last week’s launch of Kalshi-powered prediction-market apps by four Native American tribes highlighted the different positions emerging within tribal gaming. Some tribal ventures are entering federally regulated prediction markets, while other tribal organizations argue that sports event contracts threaten established gaming rights and regulatory protections.

Supreme Court Review and Public Comments Remain Ahead

The NFL has joined the legal debate, filing a brief on October 8 supporting New Jersey’s request for Supreme Court review. The league argues that states are better positioned to regulate sports-related contracts and has raised concerns about consumer protection and the integrity of sporting events.

A separate filing supporting New Jersey’s position came from 39 states and the District of Columbia. Their involvement adds to the pressure for a definitive interpretation of how federal derivatives law interacts with state gambling regulation.

New Jersey’s petition asks the Supreme Court to address whether federal regulation of event contracts prevents states from enforcing gambling laws against prediction-market operators. The court has not agreed to hear the case, and Kalshi’s response to the petition is due November 9, 2026.

Both CFTC measures allow 30 days for written public comments following their respective publication dates in the Federal Register. The proposed swap definition remains subject to rulemaking, while the casino-style gambling exclusion is designed to take effect upon publication.

The next steps will therefore unfold through both regulatory proceedings and the courts. The CFTC is seeking to formalize its distinction between financial event contracts and conventional gambling, while states continue challenging whether that distinction limits their authority over sports-related markets.

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