The Commodity Futures Trading Commission is moving to treat prediction market bets as swaps, a legal change that could strip states of their authority over sports betting. The CFTC filed two proposals, one defining event contracts as swaps and another excluding casino-style gambling products. Both are under review at the Office of Information and Regulatory Affairs.
The move would help the CFTC’s argument that federal law gives it exclusive authority over event contracts on regulated prediction markets. State gambling regulators dispute that position, particularly for sports event contracts, saying they fall under state gambling laws.
What the Proposals Cover
The CFTC is seeking to expand the definition of a “swap” to include event contracts. Swaps are financial instruments, and the CFTC already regulates them under federal law.
If the agency succeeds, event contracts — bets on future events like elections or sporting matches — would be treated as swaps rather than as state-regulated gambling. That would put them under federal oversight exclusively.
The CFTC has pointed to Polymarket and Kalshi as examples of regulated exchanges offering event contracts. Both platforms operate as prediction markets, letting users bet on outcomes ranging from political elections to sports results.
The Gambling Exclusion
The second proposal excludes casino-style gambling products from the swap definition. That distinction matters because it separates regulated prediction markets from traditional casinos, which the CFTC is not trying to bring under its jurisdiction.
The exclusion means the CFTC is targeting prediction markets specifically, not all forms of betting. Sportsbooks and other traditional gaming operations are left outside the scope of the proposed rule.
Who Is Involved
The CFTC regulates swaps and wants exclusive jurisdiction over prediction markets. State gambling regulators say sports event contracts fall under state law. Polymarket and Kalshi are the regulated exchanges the CFTC cites as examples. Kalshi’s recent loss of an appeal could lead to a Supreme Court case.
The Review Process
The proposals are under review at the Office of Information and Regulatory Affairs. The CFTC’s argument rests on federal law giving it exclusive authority over swaps on its regulated exchanges. State regulators counter that sports event contracts are subject to state law.
The fight pits federal regulatory power against state sovereignty. The CFTC wants to consolidate oversight in Washington; state regulators want to keep control over sports betting.
The Paper’s View
The CFTC’s approach is aggressive. It treats prediction markets as swaps and excludes casino-style gambling in the same filing. That split is convenient for the agency, but it is not necessarily fair to the public.
The jurisdiction fight is unresolved. Kalshi’s appeal loss sets the stage for a Supreme Court case, and the CFTC’s proposals could accelerate that timeline.
The key facts from the filing:
- The CFTC filed two proposals
- Both proposals are under review at the Office of Information and Regulatory Affairs
- The proposals seek to define event contracts as swaps and exclude casino-style gambling products
- Kalshi recently lost an appeal, setting up a potential Supreme Court case
- Polymarket and Kalshi are the regulated exchanges the CFTC cites as examples
The CFTC is pushing hard to establish its authority over prediction markets. The question is whether the federal government should control these platforms or whether states should keep their traditional role.
Key Players
| Player | Role |
|---|---|
| CFTC | Regulates swaps, seeks exclusive jurisdiction |
| State gambling regulators | Dispute the CFTC’s claim, say sports contracts fall under state law |
| Polymarket | Regulated exchange cited by the CFTC |
| Kalshi | Regulated exchange cited by the CFTC; recently lost an appeal |
Kalshi’s appeal loss sets the stage for a Supreme Court case. The CFTC’s proposals could accelerate that timeline by clarifying which bets fall under federal oversight and which stay under state law.
Where the paper stands
The paper backs states’ authority over sports betting and is against the CFTC’s proposal to treat prediction market bets as swaps, which could strip states of their authority. The CFTC’s approach is aggressive, treating prediction markets as swaps while excluding casino-style gambling in the same filing. That split is convenient for the agency, but it is not necessarily fair to the public.
The jurisdiction fight is unresolved, and Kalshi’s appeal loss sets the stage for a Supreme Court case. The CFTC’s proposals could accelerate that timeline by clarifying which bets fall under federal oversight and which stay under state law. The paper supports state regulators who say sports event contracts fall under state law, not federal swaps law. The fight pits federal regulatory power against state sovereignty, and the paper backs the side that keeps power closer to the people affected by it.
See the a run of 16 images at Cointelegraph.
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