The Commodity Futures Trading Commission (CFTC) has submitted two rule proposals to the White House for review, aiming to define prediction-market event contracts as "swaps" under federal jurisdiction while excluding casino-style gambling. This regulatory push by sole CFTC member Michael Selig comes amid an escalating jurisdictional clash with states. It follows a September 25, 2026, Sixth Circuit ruling that Kalshi's sports contracts are not swaps and can be regulated as gambling by Ohio and Tennessee, deepening a federal circuit split.
CFTC's proposed rules on event contracts
- ▪The Commodity Futures Trading Commission's proposed rule RIN 3038-AF82 would explicitly define the term "swap" to include event contracts and will be subject to public comment.
- ▪The Commodity Futures Trading Commission submitted two rule proposals to the White House Office of Information and Regulatory Affairs on September 28, 2026, to redefine "swap" for event contracts, which is reviewing them before formal publication.
- ▪The Commodity Futures Trading Commission classified both the event contract inclusion proposal and the casino-style exclusion proposal as not economically significant.
- ▪The Commodity Futures Trading Commission's interim final rule RIN 3038-AF81 would exclude "casino-style gambling products" from the swap definition and could take effect immediately upon approval.
Clarifying swap definitions
- ▪Securities and Exchange Commission Chairman Paul Atkins stated that the joint request for comment was long overdue for issues including event-based products.
- ▪The Commodity Futures Trading Commission and the Securities and Exchange Commission issued a joint request for comment in June 2026 to clarify swap definitions, including event-based products.
Litigation with states
- ▪The Commodity Futures Trading Commission has taken at least nine states to court over limits on event contracts.
- ▪The Commodity Futures Trading Commission maintains that most prediction-market contracts, including sports-related contracts, qualify as swaps and fall under its exclusive federal jurisdiction.
Appeals court rulings on Kalshi contracts
- ▪The U.S. Sixth Circuit Court of Appeals held that the Commodity Exchange Act does not preempt Ohio and Tennessee from enforcing state gambling laws against Kalshi's sports contracts.
- ▪The U.S. Sixth Circuit Court of Appeals ruled on September 25, 2026, that Kalshi's sports-event contracts do not qualify as swaps under the Commodity Exchange Act.
- ▪The U.S. Third Circuit Court of Appeals previously ruled in favor of Kalshi in a New Jersey dispute, holding that Kalshi's sports contracts were swaps subject to federal jurisdiction.
State legal actions against prediction markets
- ▪Multiple states have sued prediction-market operators alleging illegal gambling, prompting the Commodity Futures Trading Commission to file countersuits to block state regulatory oversight.
- ▪New York Attorney General Letitia James sued Polymarket in September 2026 to ban the platform from operating within New York's jurisdiction.
- ▪New Jersey Attorney General Jennifer Davenport petitioned the U.S. Supreme Court in September 2026 to review whether states can regulate sports-event contracts.
Growth of prediction markets
- ▪Designated contract markets certified approximately 1,600 new event contracts in 2025, compared to an average of about five per year from 2006 through 2020.
- ▪Prediction-market platforms including Polymarket and Kalshi have grown into businesses valued at tens of billions of dollars.
Rulemaking on crypto assets
- ▪Federal regulators accelerated standalone rulemaking after the Clarity Act, a sweeping digital-asset regulatory bill, failed in a Senate procedural vote in October 2026.
- ▪The Commodity Futures Trading Commission submitted a separate crypto-markets rulemaking proposal, titled Regulation Crypto Asset Transactions, to the White House on September 17, 2026.
Debatable claims
- ▪Sports-event contracts serve a genuine economic purpose
- ▪The federal government should have exclusive regulatory authority over prediction markets
- ▪CFTC rulemaking by a single commissioner is inappropriate
- ▪Distinguishing event contracts from casino-style gambling is an effective regulatory boundary
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