CFTC swap rule formalises federal claim before Supreme Court rules

Chairman Michael Selig stood in front of two rulemakings on a Friday and drew a line that federal regulators had been circling for three years. On one side: event contracts tied to sports, weather, politics, and cultural outcomes, now formally proposed as swaps under the Commodity Exchange Act. On the other: sportsbook wagers and casino games, confirmed by interim final rule as excluded from that definition. The boundary is now in the Federal Register, not just in enforcement posture.

The timing is the argument. The Supreme Court has before it New Jersey's petition in Flaherty v. KalshEX, asking the justices to resolve a circuit split between the Third and Ninth Circuits over whether event contracts qualify as federally regulated swaps. Gaming regulators from 39 states and the District of Columbia have filed supporting briefs. The NFL has filed its own. While those briefs accumulate, the CFTC sent both proposals to the Office of Information and Regulatory Affairs on September 28 — the White House regulatory review office that sits between an agency's intentions and the Federal Register. The sequence matters: the agency is trying to establish statutory and regulatory facts on the ground before the Court decides whether to take the case.

I have seen this move before. An agency facing an adverse circuit ruling accelerates its rulemaking to present reviewing courts with a completed regulatory record rather than an agency position. The theory is that a finalized rule commands more deference than an enforcement brief. The problem, post-Loper Bright, is that deference to agency statutory interpretation is no longer automatic. A CFTC rule defining event contracts as swaps is not, by itself, a judicial resolution of the circuit split. The Court that inherited Chevron's absence will read the Commodity Exchange Act for itself.

Selig's statement describes event contracts as "commodity derivatives squarely within the CFTC's regulatory remit." That is a legal conclusion dressed as a factual one. The relevant question under the Act is whether the statutory text compels that reading, and the Third and Ninth Circuits have reached different answers. A Chairman's characterization of his own agency's jurisdiction does not settle the disagreement — it illustrates it.

What the interim final rule does accomplish is narrower and more durable: it formally excludes casino-style gambling from the swap definition, drawing a structural line that state regulators have been demanding for years. That exclusion, once in the Federal Register, gives state gaming commissions a textual hook. If sportsbook products are categorically not swaps, state jurisdiction over them is not displaced by CFTC authority. The 39 states that filed with the Supreme Court are arguing, in part, that this is exactly the line that should hold.

The consensus read is that these rulemakings strengthen the CFTC's hand before the Court. I don't think that's where this lands. The agency is filing into a post-Loper Bright environment where the strength of a rule is only as good as the statutory text underneath it, and the circuit split exists precisely because reasonable judges read that text differently. The rulemakings may harden the CFTC's litigation posture, but they do not resolve the ambiguity the Court would be asked to clear. The standard the justices will apply is the statute — not the agency's most recent account of what the statute means.