CFTC Says Prediction Markets Are Swaps, Sportsbooks Are Bets—Now It's Up to SCOTUS 🎲

The Commodity Futures Trading Commission moved to formalize its grip on prediction markets Friday, issuing a proposed rule that would explicitly classify event contracts on sports, politics, cultural events and weather as "swaps" under federal law. In a paired interim final rule effective immediately upon publication, the agency drew the opposite line for casino-style gambling, codifying the view that sportsbook wagers and casino games sit outside the "swap" definition. Both measures carry 30-day public comment windows.

"The CFTC has historically recognized that many event contracts are covered by the Commodity Exchange Act's swap definition," the agency said in its proposal. CFTC Chairman Michael Selig framed the moves as bookends, telling the public: "These products are commodity derivatives squarely within the CFTC's regulatory remit under the Commodity Exchange Act and are within the agency's exclusive jurisdiction." On gambling, Selig said: "Casino-style gambling products are not derivatives," adding that the Commission is "providing clarity regarding the limits of its regulatory remit by codifying the exclusion of casino-style gambling products from the 'swap' definition."

The filings formalize proposals the agency sent to the White House for review late last month. The pair lands in the middle of an escalating turf war: multiple states have sued prediction-market operators including Kalshi and Polymarket alleging illegal gambling, and the CFTC has countersued to defend its federal authority. Selig has argued that jurisdiction is exclusive, a position that, if upheld, would place platforms like Kalshi and Polymarket beyond the reach of state gambling regulators.

The legal stakes are climbing fast. In late September, Kalshi lost an appeal when the 6th US Circuit Court of Appeals ruled unanimously that Ohio and Tennessee can regulate sports-event contracts under their state gambling laws, finding Kalshi failed to demonstrate its products are "swaps" under CFTC jurisdiction. An earlier April decision from the 3rd Circuit Court of Appeals allowed Kalshi to operate in New Jersey as its appeal proceeds, saying Kalshi was likely to succeed on its argument that federal law preempts state regulation. A group of state lawmakers also filed an amicus brief urging the Supreme Court to weigh in, potentially resolving whether state authorities or federal regulators have jurisdiction over prediction-market companies.

The CFTC has broadly taken a pro-industry approach toward both traditional and cryptocurrency markets. The Commission recently issued no-action relief letting crypto apps offer regulated derivatives and sent separate crypto-markets rulemakings forward. Friday's filings are the latest step in an agency effort to assert its authority rather than wait on Congress, and the swap-versus-gambling question it is trying to settle in regulation may ultimately be decided by the justices.