CFTC Tries To Swap In Its Own Definition Of A Swap 🎯

The Commodity Futures Trading Commission has sent the White House two rules aimed at cementing its authority over prediction markets by rewriting the legal definition of a "swap" to explicitly cover event contracts. Both proposals were submitted to the Office of Information and Regulatory Affairs on Sept. 28, according to the source reporting. The first, a proposed rule identified as RIN 3038-AF82, would expand the "swap" definition to include event contracts and proceed to public comment. The second, an interim final rule (RIN 3038-AF81), would exclude "casino-style gambling products" from the swap definition and could take effect upon approval. The CFTC classified both as not economically significant, and their full text is not yet public.

The "swap" label sits at the center of a jurisdictional fight between the CFTC and state gambling regulators over platforms such as Kalshi and Polymarket. CFTC Chairman Michael Selig has argued that federal law gives the agency exclusive authority over swaps traded on CFTC-regulated exchanges, a position that would place prediction markets beyond the reach of state oversight. Multiple states have sued prediction-market operators alleging illegal gambling, and the CFTC has countersued to block that oversight. The rulemaking follows a string of conflicting appeals-court decisions over whether the contracts qualify, a split now drawing the Supreme Court's attention.

The move extends a broader pattern of the CFTC pressing ahead with its own rules rather than waiting on Congress, part of a post-Clarity Act shift toward regulators setting crypto policy. The agency recently sent a separate crypto-markets rulemaking to the White House, while its staff warned that "mention" contracts tied to public statements invite manipulation. The Commission also sent out an advisory earlier this week warning against "mention markets," suggesting prediction market contracts settling on whether a named person says certain words should be presumed readily susceptible to manipulation.

Federal scrutiny of prediction markets continues to grow. The CFTC is investigating former Rep. Adam Kinzinger over Kalshi bets tied to his own pardon. At the state level, New York Attorney General Letitia James and Governor Kathy Hochul announced a lawsuit Wednesday accusing Polymarket of running an unlicensed gambling business in the state. The suit, filed against QCX LLC doing business as Polymarket US, alleges the platform's markets meet New York's legal definition of gambling because users bet money on uncertain outcomes outside their control, and echoes an earlier New York action against Kalshi. For now, the CFTC's filings signal intent rather than final rules, but the agency is moving to write the swap definition itself.