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The Commodity Futures Trading Commission has advanced two measures that could reshape how prediction markets operate and how courts view the agency’s authority over sports‑related event contracts. Earlier this week, the CFTC sent both rules to the White House’s Office of Management and Budget for review, according to Bloomberg.
One of them, labeled “interim final,” would immediately change the definition of a swap by carving out casino‑style gambling products. That step would take effect as soon as it appears in the Federal Register, a rare move that agencies usually reserve for situations where they can show good cause.
The second proposal would go in the opposite direction, expanding the swap definition to cover event contracts traded on platforms such as Kalshi, Polymarket, Rothera, and Novig.
Once OMB finishes its review, the rules will return to the commission, where Chairman Michael Selig, currently the sole member, must vote to release them for public comment.
The battle of ‘swaps’ continue
The fight over whether event contracts should be treated as swaps has become the center of a wider jurisdictional struggle.
If these contracts are defined as swaps, they fall directly under the CFTC’s authority, a position Chairman Michael Selig insists is exclusive. That interpretation would keep prediction platforms outside the reach of state gambling regulators, who have already filed lawsuits claiming illegal gambling activity.
The clash has reached higher levels. Several appeals courts have issued conflicting rulings on whether event contracts qualify as swaps, and the split has drawn the attention of the Supreme Court.
Rather than wait for Congress to step in, the CFTC has pressed forward with its own rulemaking, continuing a broader trend seen since the Clarity Act where regulators set policy for crypto and related markets.
The agency has also widened its scrutiny. Former Rep. Adam Kinzinger is under investigation for wagers placed on Kalshi tied to his own pardon, while a new advisory warned against “mention markets,” contracts that settle on whether a named person says certain words.
The CFTC argued such markets are prone to manipulation. At the same time, state regulators remain aggressive. New York recently sued Polymarket, seeking to ban it within its borders, following earlier action against Kalshi.
For now, the CFTC’s filings show intent rather than final rules. But by attempting to write the swap definition itself, the Commission is trying to settle through regulation what courts and states have been fighting case by case.
Image credit: G. Edward Johnson, CC BY 4.0 <https://creativecommons.org/licenses/by/4.0>, via Wikimedia Commons
