CFTC proposes swap status for event contracts and codifies gambling exclusion

The Commodity Futures Trading Commission issued two measures Friday that would formally define event contracts as swaps under federal law while excluding traditional gambling. The first measure is a proposed rule open for public comment. The proposed rule would expressly expand the swap definition to include event contracts tied to sports, politics, cultural events and weather.

The CFTC said event contracts are financial instruments commonly known in the trade as swaps. The CFTC said the proposed rule resolves ambiguity about the contracts' status. Chairman Michael Selig said the products are commodity derivatives within the CFTC's regulatory authority under the Commodity Exchange Act and within the agency's exclusive jurisdiction.

The second measure is an interim final rule effective immediately upon publication. The interim final rule codifies the CFTC's longstanding view that casino-style gambling products, including sportsbook wagers and casino games, are excluded from the swap definition. Selig said casino-style gambling products are not derivatives and described the measure as clarifying the limits of the CFTC's authority. Both measures have 30-day public comment windows.

Classifying event contracts as swaps would place the contracts under CFTC authority. Selig has argued that this authority is exclusive, placing platforms such as Kalshi and Polymarket beyond state gambling regulators' reach. Multiple states have sued prediction-market operators alleging illegal gambling. The CFTC has countersued to defend the agency's jurisdiction.

The measures formalize proposals the CFTC sent to the White House for review late last month. The measures form part of a broader effort by the CFTC to assert authority rather than wait for Congress. The CFTC has broadly taken a pro-industry approach toward traditional and cryptocurrency markets. The CFTC recently issued no-action relief allowing crypto apps to offer regulated derivatives. The CFTC also advanced separate crypto-market rulemakings.

A court split over whether event contracts qualify as federally regulated swaps has drawn the Supreme Court's attention. The dispute pits the NFL and others against Kalshi. The justices may ultimately decide the question the CFTC is trying to settle through regulation.