CFTC Moves to Define Prediction Markets as Swaps

The U.S. Commodity Futures Trading Commission has submitted two proposed rules to the White House for review as it seeks to strengthen federal oversight of prediction markets and event contracts.

The proposals, sent to the Office of Management and Budget on September 28, could reshape the regulatory treatment of platforms including Kalshi, Polymarket, Crypto.com and Robinhood. One proposal would expand the regulatory definition of swaps to include event contracts, while another would establish that such financial instruments do not include “casino-style gambling products.”

Prediction markets allow users to trade contracts based on measurable outcomes, including elections and sporting events. The CFTC has increasingly asserted that these products fall under its federal jurisdiction, putting the agency at odds with states that consider some event contracts gambling products subject to state laws.

The regulatory push comes amid conflicting federal court decisions involving Kalshi. The Sixth and Eighth Circuit Courts of Appeals have ruled that sports-related Kalshi contracts are not swaps and can therefore face state gambling regulation. The Third Circuit, however, previously concluded that the CFTC has jurisdiction over prediction markets.

The split among federal appeals courts has increased the possibility that the U.S. Supreme Court could eventually be asked to resolve the dispute.

If the CFTC formally classifies event contracts as swaps while distinguishing them from gambling products, the rules could strengthen its position in ongoing legal battles with states. CFTC Chairman Mike Selig has argued that the agency holds exclusive jurisdiction over federally regulated prediction markets.

OMB review is generally one of the final stages before proposed federal rules are released for public comment. An interim final rule, however, could become effective immediately while remaining open to public feedback and subsequent revisions.

The CFTC classified both proposals as not economically significant and has not yet released their full text. Selig currently serves as the commission’s sole member, with President Donald Trump yet to nominate additional commissioners.

The agency has also submitted a separate preliminary rulemaking initiative involving cryptocurrency regulation as it expands its focus on digital asset markets.