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U.S. CFTC moves to fold event contracts into swaps regulations as legal fight rages
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The U.S. Commodity Futures Trading Commission moved Friday to formally classify event contracts as swaps, asserting exclusive federal authority over prediction markets. The agency issued an interim final rule and proposed a companion rule. The action intensifies a legal battle with states.
The interim final rule immediately excludes casino-style gambling from the swap definition. It remains open for public comment during implementation. The proposed rule would explicitly fold event contracts, including sports, politics, cultural and weather-related events, into existing swaps regulation.
The CFTC's position is championed by Chairman Mike Selig. He argues prediction market transactions belong solely to the agency. Platforms such as Kalshi and Polymarket support that view.
Several states disagree and have sued the regulator. They insist they have authority over sports betting on these platforms. Some accuse the platforms of illegal gambling.
Recent court decisions have split. One federal appellate ruling opposed the states, while two supported them. The issue has reached the U.S. Supreme Court. States and former federal officials submitted views this week.
TD Cowen analyst Jaret Seiberg wrote that the interim final rule is designed to improve the agency's court position. He noted states argue the CFTC's swap definition could make casino or tribal sportsbook wagers federally illegal. Whether it works remains uncertain, he added.
The CFTC submitted these actions for White House review less than two weeks ago. The speedy process shows urgency. Selig is the lone commissioner on a commission meant to have five members. President Donald Trump has declined to name additional commissioners.
The proposed rule has a brief 30-day comment period. If the CFTC makes its case at the Supreme Court, it can now point to implementation already underway. The outcome will shape oversight of prediction markets.
