White House reviews two CFTC proposals on prediction market contracts

The White House is reviewing two Commodity Futures Trading Commission (CFTC) proposals concerning prediction markets this week. The CFTC submitted the proposals to the White House's Office of Information and Regulatory Affairs for review before publication. One proposal would expand the definition of a swap to include event contracts. The other would exclude casino-style gambling products. Prediction markets including Polymarket and Kalshi offer contracts on events ranging from company listings to television competitions. The platforms also offer sports contracts, which are at the center of a jurisdictional dispute. The CFTC argues that most prediction market contracts, including sports contracts, are swaps under its federal jurisdiction. However, states say the platforms operate illegally within their borders and violate gambling laws. States have also criticized the platforms' age limits and said the platforms avoid paying taxes. Multiple states have sued certain platforms. The CFTC has filed countersuits seeking to block state oversight of prediction markets. Last week, a federal appeals court ruled that Ohio and Tennessee can enforce their sports gambling laws against Kalshi. The court rejected Kalshi's argument that federal law shields its sports contracts from state regulation. Earlier this month, New Jersey Attorney General Jennifer Davenport asked the Supreme Court to review the jurisdictional dispute after courts reached differing positions over the past year. The casino-style gambling proposal is at the 'interim final rule' stage, according to the Office of Information and Regulatory Affairs website. Gaming and sports betting lawyer Daniel Wallach said the rule would take effect immediately upon release, without the usual notice-and-comment process. Wallach said that process could leave the rule open to a court challenge under the Administrative Procedure Act. Wallach said the rule could prompt immediate federal litigation if it implicitly authorizes sports-event contracts rather than merely excluding casino-style products. Last week, the CFTC also submitted crypto rulemaking to the White House. The submissions follow the Senate's rejection earlier this month of the Clarity Act in a procedural vote. The bill would have established comprehensive federal regulation of the digital asset industry for the first time.