CFTC swap definition carves casino products out of federal reach

When the CFTC filed two rulemaking packages with the White House on September 28, the document that drew less attention was the more consequential one. The proposed rule to define event contracts as swaps — RIN 3038-AF82 — will go to public comment and take months to resolve. The interim final rule — RIN 3038-AF81 — excludes "casino-style gambling products" from the swap definition and could take effect on approval. The asymmetry in those timelines is where the real story is.

Read that structure carefully. The CFTC is moving to pull prediction market contracts into federal swap jurisdiction while simultaneously writing a carve-out for anything that looks like casino gambling. These two rules need each other. Without the exclusion, the inclusion argument collapses — because the first thing any state attorney general will say is that Kalshi's sports contracts are indistinguishable from what happens on a casino floor. The interim rule answers that in advance, and it answers it fast.

Chairman Michael Selig has been consistent about the end goal: CFTC authority is exclusive, and state gambling law cannot reach platforms operating under a federal designation. What has been less consistent is the legal ground beneath that argument. The Sixth Circuit found that Kalshi's sports contracts are not federal swaps. New Jersey has asked the Supreme Court to weigh in. The courts have not settled this, and both Selig and the states know it.

That is why the rulemaking matters more than the litigation, and why I think most coverage is reading the sequence wrong. The standard interpretation is that the CFTC is playing defense — shoring up a position the courts have been eroding. I don't think that's where this lands. An interim final rule, classified as not economically significant to speed White House review, that redefines what falls outside the swap category, is not a defensive posture. It is an attempt to move the predicate before the Supreme Court has a chance to set it.

If the exclusion rule clears OIRA and takes effect, any court reviewing a state challenge to a CFTC-designated platform will face a federal definition already on the books. The states would be arguing against a published rule, not a contested legal theory. That is a different fight, and a harder one.

The CFTC has done this before — used the rulemaking process to get ahead of litigation that was going badly. I have watched agencies in similar positions choose that path, and it works until it doesn't: until a court finds the rule itself was issued beyond the agency's statutory authority, or until a new administration pulls the filing. Both are live possibilities here.

What neither outcome changes is the underlying question the interim rule forces into the open: who decides what a casino-style product is? The CFTC will write a definition. The states will dispute it. And the product sitting in the middle — a binary contract on whether a named team wins on a named date — will keep trading while the argument runs.