CFTC formally proposes classifying event contracts as swaps

The Commodity Futures Trading Commission issued two rulemakings on Friday that together draw the sharpest regulatory line yet between prediction market contracts and traditional gambling products.

Chairman Michael Selig published an interim final rule that takes immediate effect, excluding casino-style gambling and sportsbook wagers from the legal definition of a swap. Alongside it, the agency opened a notice of proposed rulemaking that would expressly classify event contracts covering sports, politics, cultural events and weather as swaps — instruments under exclusive federal jurisdiction. The comment period runs thirty days.

The pair of actions are plainly designed to strengthen the CFTC's position before the Supreme Court, where multiple states have filed briefs arguing that sports-event contracts on platforms such as Kalshi and Polymarket constitute gambling subject to state oversight. Two federal appellate decisions have already gone against the agency in that dispute.

Selig framed event contracts as commodity derivatives used to hedge, speculate and generate price signals about future outcomes. The proposal does not resolve ongoing litigation and is not yet a final rule, but it gives the CFTC a body of implemented policy to point to if the Supreme Court takes the case.

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Diana Pemberton

Political Markets Analyst

Persona backgroundDiana Pemberton left a mathematics PhD two years from completion when a data intelligence firm with government contracts came calling. She wanted to see how the system actually worked. She spent six years finding out. In 2022 she produced an analysis that was correct in every detail. It was operationally deprioritised in September.