The Commodity Futures Trading Commission is attempting to cement its federal authority over prediction markets by submitting two new rules to the White House for review. The proposals seek to define event contracts as swaps under the Commodity Exchange Act while excluding casino-style gambling. This regulatory push directly challenges state-level efforts to regulate platforms like Kalshi and Polymarket as illegal gambling, setting up a potential showdown in the U.S. Supreme Court.
Details of the proposed CFTC rules
- ▪The Commodity Futures Trading Commission's interim final rule RIN 3038-AF81 would exclude casino-style gambling products from the regulatory definition of a swap and take effect immediately upon publication while public comments are being gathered
- ▪The Commodity Futures Trading Commission's proposed rule RIN 3038-AF82 would amend the regulatory definition of a swap to explicitly include event contracts traded on prediction platforms
Selig's regulatory actions
- ▪In June 2026, Commodity Futures Trading Commission Chairman Michael Selig stated that a joint request for comment with the SEC on swap definitions would help address Dodd-Frank ambiguities that stifle innovation
- ▪Commodity Futures Trading Commission Chairman Mike Selig is acting unilaterally on regulatory decisions because President Donald Trump has not nominated other commissioners to the five-member agency
Court rulings on Kalshi's contracts
- ▪On September 25, 2026, a unanimous panel of the U.S. Sixth Circuit Court of Appeals ruled that Kalshi had not shown its sports contracts were swaps
- ▪The U.S. Third Circuit Court of Appeals previously ruled in favor of Kalshi, finding that the Commodity Futures Trading Commission had proper federal jurisdiction over prediction markets
State challenges to prediction markets
- ▪Multiple states, including Ohio and Tennessee, argue that sports-linked event contracts on prediction markets violate state gambling laws and operate as unregulated gambling
- ▪New Jersey Attorney General Jennifer Davenport petitioned the U.S. Supreme Court in September 2026 to review the jurisdictional conflict between federal and state regulators over prediction markets
- ▪The New York Attorney General sued prediction market Polymarket in September 2026 seeking to ban the platform from operating within the state's jurisdiction
Debatable claims
- ▪Sports-linked event contracts on prediction platforms do more harm than good
- ▪The CFTC's use of an interim final rule for prediction markets bypasses necessary public scrutiny
- ▪Prediction markets should be regulated as federal derivatives rather than state gambling
- ▪CFTC Chairman Mike Selig's unilateral rulemaking on prediction markets lacks regulatory legitimacy
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