CFTC issues interim swap definition and proposes folding event contracts into swaps

The Commodity Futures Trading Commission issued an interim final rule on Friday that places casino-style gambling outside the swap definition it enforces. A companion proposal would fold event contracts — including those tied to sports, politics, culture and weather — into the swaps rules the agency already administers.

The interim final rule becomes immediate policy but stays open to public input, while the event-contracts rule is a proposal with a 30-day comment period, CoinDesk reported. The contracts in question trade routinely on venues such as Kalshi and Polymarket.

The CFTC describes the effort as formalizing its pursuit of exclusive authority over prediction markets. In the agency's reading, defining what counts as a swap keeps event contracts inside federal oversight and out of reach of state gambling regulators, while wagers that resemble casino gambling fall outside that definition.

With the Clarity Act dead at 49-50, market-structure definitions have landed with agencies, and the CFTC is now writing the prediction-market piece of that rulebook.

Several states are in litigation with the CFTC over sports betting on the platforms, and many have accused the platforms of running illegal gambling operations, according to CoinDesk. States and former federal officials who helped write the relevant laws objected to the CFTC's interpretation and submitted their views to the U.S. Supreme Court this week. The court has been asked to resolve the issue.

Recent appellate outcomes have split: CoinDesk reports one federal appellate decision that went against the states and two that supported them.

Jaret Seiberg, a policy analyst at TD Cowen, wrote in a Friday note to clients that the interim rule appears designed to improve the agency's position in court, where states argue the CFTC's swap definition would make any wager at a state or tribal casino or sportsbook federally illegal. "Whether this actually works is a different question," he wrote.

The actions went to the White House for review less than two weeks ago, which CoinDesk describes as an especially speedy process. If the CFTC is called to argue at the Supreme Court, it will now be able to show it has already begun implementing Chairman Mike Selig's regulatory view on prediction markets.

For venues such as Kalshi and Polymarket, the operative change is narrower: casino-style wagering is now defined out of the swap definition as policy. The swap treatment of their own event contracts remains a proposal and contested in court.