CFTC proposals aimed at separating prediction markets from casino gambling
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Written by
Simonas Brazionis - Updated 2026-10-12 18:37:06
The Commodity Futures Trading Commission (CFTC) has introduced two proposals aimed at clarifying the regulatory status of prediction markets and distinguishing them from traditional gambling.
The first proposal defines event contracts, including those related to sports, politics, cultural events, and weather, as “swaps” under federal law. This classification is intended to resolve ambiguity regarding these financial instruments, which the CFTC considers commodity derivatives under its exclusive jurisdiction.
The second proposal, an interim final rule, explicitly excludes casino-style gambling products, such as wagers on sportsbooks and casino games, from the “swap” definition. Both measures, filed on a Friday, are subject to 30-day public comment periods.
Legal Battles Over Prediction Markets
These proposals emerge amidst ongoing legal disputes concerning prediction markets. Several states have initiated legal action against operators like Kalshi and Polymarket, alleging illegal gambling. In response, the CFTC has filed countersuits to assert its federal jurisdiction over event contracts, arguing they are beyond state regulatory purview.
The Sixth US Circuit Court of Appeals previously ruled against Kalshi, affirming Ohio's and Tennessee's authority to regulate sports-event contracts under state gambling laws. The court found Kalshi had not demonstrated these contracts were “swaps” under CFTC jurisdiction. Conversely, an April decision by the Third Circuit Court of Appeals allowed Kalshi to operate in New Jersey while its appeal proceeds, suggesting a likelihood of success on arguments of federal preemption over New Jersey's regulations.
Potential Supreme Court Review
The interplay of these proposals and ongoing legal challenges sets the stage for a potential Supreme Court review to determine whether state or federal authorities hold jurisdiction over prediction markets.
A group of state lawmakers has also filed an amicus brief with the US Supreme Court, urging it to address the jurisdictional question in the case involving Kalshi and state gaming authorities.
