CFTC swap rules land at the White House before any court can rule

Two documents arrived at the Office of Information and Regulatory Affairs on September 28. One would define event contracts as swaps. The other would carve casino-style gambling products out of that same definition. Together they represent the CFTC's attempt to win in rulemaking what it has been losing, or at least splitting, in court.

The sequence matters. The Third and Ninth Circuits disagreed on whether Kalshi's contracts qualify as swaps. The Supreme Court is now watching. And rather than wait for nine justices to draw the line, Chairman Michael Selig's CFTC has decided to draw it themselves — in the Federal Register, not a courtroom.

The mechanism they chose is worth examining. The casino exclusion travels as an interim final rule, which means it could take effect quickly after White House approval, without the full public comment process that the second proposal — the one formally classifying event contracts as swaps — will require. Agencies reach for interim final rules when they believe urgency justifies the shortcut. The CFTC apparently believes it does.

Here is where I part company with the consensus reading of this move. Most observers are framing these two rules as a tidy solution: swaps in, casino products out, jurisdiction clarified, states sent home. I don't think it lands that way. A rulemaking can establish a definition, but it cannot by itself resolve whether courts will accept that definition as a complete preemption of state authority. The Sixth Circuit found Kalshi's sports contracts were not swaps — that conclusion came from the statute and the contracts' characteristics, not from a regulatory gap the CFTC can simply fill by redrafting a definition. Whether a new swap rule changes that analysis depends on questions of Chevron deference, statutory authority, and administrative law that the same courts deciding the underlying cases will also have to resolve.

The interim final rule on casino exclusions creates a separate pressure point. By explicitly removing casino-style products from the swap definition, the CFTC hands state regulators a potential argument: if some event contracts are not swaps, the agency's claim to exclusive federal jurisdiction over all event contracts becomes harder to sustain. The rule that protects prediction markets from one direction may weaken the fortress wall in another.

I've watched regulators try to write their way out of jurisdictional disputes before. The instinct is understandable — rulemaking is faster than litigation and feels more permanent. But a rule written to influence pending litigation tends to arrive already contested. States that have sued Kalshi and Polymarket are not going to read these filings and withdraw. They are going to argue, in the same courts, that a rule promulgated after the litigation began deserves limited deference precisely because of why it was written.

The White House review adds another variable. Both rules were classified as not economically significant — a designation that accelerates OIRA review but also limits the formal cost-benefit analysis attached to the final text. For rules this consequential to an industry whose annual trading volume is approaching twenty billion dollars, that classification will draw scrutiny of its own.