CFTC swap rule would strip states of their gambling argument

The Office of Management and Budget received two CFTC rulemaking submissions on 28 September that, if finalised, would settle by regulation what three federal courts have been unable to settle by adjudication.

The first proposal, RIN 3038-AF82, would extend the statutory definition of "swap" to explicitly include event contracts — the binary yes-or-no instruments traded on Kalshi, Polymarket, Crypto.com and Robinhood. The second, an interim final rule filed as RIN 3038-AF81, would remove "casino-style gambling products" from the swap definition entirely. The interim rule could take effect on OMB approval without waiting for public comment to close.

The mechanism is precise. If event contracts are swaps, CFTC jurisdiction is exclusive under the Commodity Exchange Act. If they are also not gambling products, state regulators lose both arguments simultaneously — the claim that the contracts fall outside federal jurisdiction and the claim that they constitute illegal gambling under state law.

The Sixth Circuit ruled on 23 September that Kalshi's sports-tied contracts are not swaps and remain subject to Ohio and Tennessee gambling law. The CFTC's new rulemaking, submitted five days later, is a direct legislative response to that holding. Chairman Michael Selig is not waiting for the Supreme Court to resolve the circuit split; he is attempting to write the answer into the Code of Federal Regulations before the court gets the chance.