The Commodity Futures Trading Commission (CFTC) has proposed new regulations to classify event contracts as swaps, aiming to distinguish them from gambling activities. This move follows a federal court ruling that recently categorized sports-linked contracts on the Kalshi platform as subject to state gambling laws rather than federal swap regulations.
The proposed rules would formally include event contracts traded on platforms such as Kalshi, Polymarket, Crypto.com, and Robinhood under the regulatory definition of swaps. Simultaneously, the commission is introducing an interim final rule to exclude casino-style gambling products from the swap category.
Both proposals have been submitted to the White House Office of Management and Budget for review, which serves as the final stage before public comment. The CFTC intends to establish itself as the primary federal watchdog for prediction markets, countering state-level efforts to regulate these instruments as gambling.
Separately, federal lawmakers and bank regulators have expressed concerns regarding prediction markets like Polymarket. Specifically, officials are monitoring contracts tied to the probability of bank failures, citing potential risks related to market manipulation, insider trading, and the possibility of triggering bank runs.
