The Commodity Futures Trading Commission (CFTC) has issued two proposals, one that would define event contracts as “swaps” under federal law and another that would exclude traditional casino gambling from that definition.
Several states have sued prediction-market operators, including Kalshi and Polymarket, alleging illegal gambling, and the CFTC has countersued to defend its federal jurisdiction over event contracts, which it claims are beyond the purview of state regulators.
D First offer Clarifies the definition of “swap” to include event contracts involving sports, politics, cultural events and weather.
It notes that these contracts are financial instruments commonly known to the trade as swaps and proposes to resolve any ambiguity about them.
“These products squarely fall within the CFTC’s regulatory remit under the Commodity Exchange Act and are within the agency’s exclusive jurisdiction,” said Chairman Michael Selig.
Both systems have a 30-day comment window
D Second proposition Codifies the CFTC’s view that casino-style gambling products, including bets placed on sportsbooks and casino games, are excluded from the definition of “swap.”
“Casino-style gambling products are not derivatives,” Selig said, “as the CFTC has historically done with other products regulated by states, the Commission today provides clarity about the limits of its regulatory remit by codifying the exclusion of casino-style gambling products from the definition of ‘swap.'”
Both measures, filed Friday, carry a 30-day comment window.
The two measures help set the stage for a potential Supreme Court battle over federal and state jurisdiction.
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Cointelegraph reported in late September that prediction market Kalshi lost an appeal after a court ruled that Ohio and Tennessee could regulate sports-event contracts under their state gambling laws.
6th US Circuit Court of Appeals governed by While a three-judge panel unanimously sided with Ohio and Tennessee against Kalshi, the prediction market failed to demonstrate that its sporting-event contracts were “swaps” under the CFTC’s jurisdiction.
Still, an April decision by the 3rd Circuit Court of Appeals allowed Kalshi to do business in New Jersey while the appeals process continues.
The April ruling said Kalshi could succeed in his argument that federal law preempts New Jersey’s regulations, all of which set up a potential Supreme Court case.
Cointelegraph also reported that a group of state lawmakers filed an amicus brief with the Supreme Court, urging it to consider the case between Kolshi and state gaming authorities, potentially resolving whether state authorities or federal agencies have jurisdiction over prediction market companies.
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