CFTC Moves to Expand Swap Rules for Prediction Markets

The US Commodity Futures Trading Commission (CFTC) is moving to clarify how federal law applies to event contracts as it faces a growing jurisdictional dispute with state gambling regulators over prediction markets.

A docket from the Office of Information and Regulatory Affairs shows the CFTC has submitted a proposed rule that would broaden the definition of a “swap” to cover event contracts. The agency has also submitted an interim final rule that would specifically exclude casino-style gambling products. Both proposals are currently under review.

The classification could have major implications for prediction markets because the CFTC has maintained that federal law gives it exclusive authority over swaps traded on federally regulated exchanges.

Platforms such as Polymarket and Kalshi offer contracts tied to real-world events, including political, economic and sports outcomes. The CFTC's position is that contracts falling within its federal jurisdiction should not also be regulated under individual state gambling laws.

State regulators have challenged that interpretation, especially when it comes to sports-related event contracts. They argue that certain products function as wagers and should therefore fall under state gambling regulations rather than federal commodities rules.

By expanding the definition of a swap while separating casino-style products, the CFTC could establish a clearer framework for determining which prediction market contracts fall under federal oversight.

The rules remain under review, meaning the final scope and impact of the proposed changes have yet to be determined.