CFTC Issues Two Proposals to Separate Prediction Markets From Casino Gambling

The Commodity Futures Trading Commission has put forward two measures aimed at drawing a clear line between prediction markets and casino gambling. The first would define event contracts, including those tied to sports, politics, cultural events and weather, as swaps under federal law. The agency says these are financial instruments already known in the trade as swaps, and the proposal seeks to remove any ambiguity. Chairman Michael Selig called them commodity derivatives within the agency’s exclusive jurisdiction under the Commodity Exchange Act.

Casino-Style Gambling Excluded From Swap Definition

The second proposal writes into rule the CFTC’s position that casino style products, such as sportsbook wagers and casino games, are not swaps. Selig said they are not derivatives and compared the move to how the agency has handled other state-regulated products. Both proposals were filed Friday and carry 30-day comment periods.

State Lawsuits Against Kalshi and Polymarket

Several states have sued Kalshi and Polymarket, alleging illegal gambling, while the CFTC has countersued to protect its authority. The new proposals help set up a possible Supreme Court fight over federal versus state control.

In late September, the 6th Circuit unanimously sided with Ohio and Tennessee, finding Kalshi had not shown its sports contracts are swaps. In April, however, the 3rd Circuit let Kalshi keep operating in New Jersey, saying it was likely to win on federal preemption.