CFTC draws a line between event contracts and casino gambling

Two rules arrived at the White House this week, and the gap between them is where the entire legal argument lives.

The Commodity Futures Trading Commission sent both measures to the Office of Information and Regulatory Affairs for review. One is a proposed rule — RIN 3038-AF82 — that would amend the statutory definition of a "swap" to explicitly include event contracts. The other is an interim final rule — RIN 3038-AF81 — that would carve casino-style gambling products out of that same definition. The proposed rule goes to public comment before it can take effect. The interim final rule could apply the moment OIRA approves it.

That sequencing is the tell. Agencies reach for interim final rules when they want a regulation in place before the comment clock runs out. The CFTC wants the casino exclusion to land first — enforceable, immediate — while the broader swap classification is still being argued in public. The order of operations is a strategic choice dressed as administrative procedure.

The classification matters because it is the entire jurisdictional argument. If event contracts are swaps under the Commodity Exchange Act, they sit under federal authority. Chairman Michael Selig has maintained that this authority is exclusive, which would leave state gambling regulators without a legal foothold. Ohio, Tennessee, and New York have disputed that position in court, and the circuit courts have not agreed with each other. New Jersey's attorney general has asked the Supreme Court to settle it.

The CFTC's interim carve-out for casino products does something specific inside that argument: it concedes that a line between financial derivatives and gambling exists, then claims the power to draw it. That is a different posture than arguing the two categories don't overlap. It is an agency saying: we see the distinction, we are codifying it, and the distinction is ours to make.

I am not persuaded that this resolves the litigation. The proposed rule still has to survive public comment, potential congressional challenge under the Congressional Review Act, and the courts that have already found against the agency. The interim final rule's unusual procedural path will itself draw scrutiny — agencies that skip notice-and-comment typically need a compelling justification, and "we lost in the Sixth Circuit" is not one the Administrative Procedure Act recognizes.

What the CFTC has done is move the debate from case law to rulemaking, which is a slower track with more procedural handles for opponents to pull. The states that have been litigating this understand that. MGM's Bill Hornbuckle, speaking at the Global Gaming Expo in Las Vegas before stepping down, said Nevada regulators told his company directly that entering prediction markets would affect licensing. That is a state regulator acting as if federal preemption does not exist — because, as the law currently stands, they have grounds for that position.