CFTC Brings Event Contracts Under Swap Regulation Amid Court Battles
The US Commodity Futures Trading Commission (CFTC) has moved from statements to concrete regulatory action: the agency issued an interim final rule and a proposed amendment that explicitly bring event contracts under the definition of swaps. This strengthens the regulator's hand in its conflict with state authorities trying to classify sports and political betting on such platforms as gambling.
The Core of the Regulation: Event Contracts as Swaps
The CFTC proposes to codify that event contracts - including those tied to sports, political, cultural and weather events traded on Kalshi and Polymarket - fall under the federal definition of swaps. At the same time, an interim rule carves casino-style gambling out of that definition to avoid regulating traditional betting.
- The interim final rule is already in effect but remains open for comments.
- The proposed amendment explicitly classifies event contracts as swaps, with a 30-day comment period.
- The goal is to secure the CFTC's exclusive jurisdiction over prediction markets.
- Casino-like wagering stays outside the swap definition.
Legal Backdrop: Why the CFTC Is Moving Fast
Several states have filed lawsuits arguing that platforms like Kalshi are running illegal gambling operations subject to state oversight. Federal appeals courts have already issued conflicting rulings: one backed the states, two sided with the CFTC. The question is now headed to the US Supreme Court.
"We see this interim final rule as a tool to strengthen the agency's position in court, as states argue that the CFTC's swap definition would make any bet at a state casino or sportsbook federally illegal," noted TD Cowen analyst Jaret Seiberg.
Politics and Industry Response
The documents cleared the White House review process in under two weeks. CFTC Chairman Mike Selig remains the sole commissioner - President Donald Trump has yet to appoint additional members, allowing Selig to single-handedly drive the agency's policy. Kalshi and Polymarket both back the CFTC's push to become their sole regulator.
The new regulation could reshape the US prediction market by narrowing the states' room to maneuver and reinforcing federal control. Market participants should watch the comment process and the final rule text.
