U.S. CFTC seeks event contract definitions that may defy states’ gambling claims

The latest CFTC moves would counter that view by more clearly defining swaps, which are agency-regulated financial instruments in which two parties agree to an exchange. The CFTC is seeking to propose a new rule that would extend the regulatory definition of swaps to include event contracts, traded on popular platforms including Kalshi, Polymarket, Crypto.com and Robinhood. It’s also pursuing an “interim final rule” that would remove “casino-style gambling products” from what can make up a swap.

Both were received by the OMB this week, where a review is generally a final step on the path to submitting rules for public comment. In the case of an interim final rule, that would be an immediately effective move that would remain open for input and revision.

If event contracts are swaps, and such swaps are not gambling products, this could undermine the states’ position in a wide array of lawsuits against prediction markets companies — routinely Kalshi — that are being accused of operating illegal gambling platforms in their states.

The CFTC has actively engaged in these lawsuits, regularly suing the states as it defends what Chairman Mike Selig has argued is the agency’s sole jurisdiction over prediction markets. The matter has drawn some conflicting rulings in federal appellate courts, suggesting the likelihood that the U.S. Supreme Court could eventually be tapped to decide the matter.