The Commodity Futures Trading Commission (CFTC) has released two regulatory proposals aimed at distinguishing event contracts from traditional casino gambling. The first measure classifies event contracts—covering sports, politics, culture, and weather—as swaps under federal law. The agency asserts these instruments fall exclusively under its jurisdiction as commodity derivatives.
The second proposal explicitly excludes casino-style gambling and sportsbooks from the definition of a swap. CFTC Chairman Michael Selig stated that these products are not derivatives and remain outside the agency's regulatory remit, effectively leaving them to state-level oversight.
These actions follow ongoing legal disputes between prediction-market operators like Kalshi and Polymarket and various state authorities. Several states have initiated lawsuits against these platforms, alleging illegal gambling operations, while the CFTC has intervened to defend its federal authority over event contracts.
The legal landscape remains fragmented. The 6th US Circuit Court of Appeals recently ruled that Ohio and Tennessee may regulate sports-event contracts under state gambling laws, rejecting Kalshi's claim that these are federal swaps. Conversely, the 3rd Circuit Court of Appeals previously allowed Kalshi to operate in New Jersey pending appeal.
These conflicting rulings have created a jurisdictional conflict that may reach the US Supreme Court. A group of state lawmakers has already filed an amicus brief with the Supreme Court, requesting a definitive ruling on whether federal agencies or state authorities hold jurisdiction over prediction market companies.
