CFTC Proposes Classifying Prediction Market Contracts as Swaps
United States.- 14 October 2026 | www.zonadeazar.com The US Commodity Futures Trading Commission (CFTC) has introduced two regulatory measures designed to distinguish event contracts traded on prediction markets from traditional casino gambling and sportsbook products.
The initiative proposes classifying event contracts as swaps, financial derivatives subject to federal oversight, while explicitly excluding conventional sports betting and casino games from that definition.
The measures represent a significant development in the debate over prediction market regulation, which has become the subject of legal disputes between federal and state authorities.
Event Contracts Under Federal Supervision
The CFTC’s first proposal seeks to expand and clarify the regulatory definition of swaps to encompass contracts linked to future events.
The categories covered include:
- Political events, including election outcomes.
- Sporting events and their potential results.
- Weather conditions and meteorological developments.
- Cultural events and other future occurrences.
According to the Commission, these instruments can be used to hedge risks, speculate on outcomes and provide information about the likelihood of future events.
Classifying them as financial derivatives would strengthen their regulation under the federal framework governing commodity markets.
Michael Selig Defends CFTC Jurisdiction
Michael Selig, Chairman of the CFTC, argued that event contracts are commodity derivatives falling within the agency’s regulatory authority.
He explained that these instruments serve several economic purposes, including risk management, speculation and providing information to the public.
The Commission maintains that the Commodity Exchange Act grants it exclusive jurisdiction over contracts qualifying as swaps.
This interpretation represents a central argument in the ongoing disputes between the federal regulator and individual US states.
Traditional Gambling Products Excluded
The CFTC’s second measure explicitly distinguishes prediction market contracts from conventional gambling products.
Through an interim final rule, the agency confirms that traditional gambling activities do not qualify as financial derivatives.
The exclusion covers:
- Conventional sports betting products offered by sportsbooks.
- Casino games.
- Other traditional casino-style gambling activities.
Selig stated that casino-style gambling products are not derivatives and explained that the measure clarifies the boundaries of the Commission’s regulatory authority.
The interim final rule will take effect upon publication in the Federal Register.
Two Measures With 30-Day Consultation Periods
Both regulatory measures were released with 30-day public comment periods.
The event contract proposal seeks to establish a clearer regulatory classification before any final rule is adopted.
Meanwhile, the interim final rule formalises the CFTC’s longstanding interpretation concerning gambling products excluded from its jurisdiction.
The measures follow regulatory proposals submitted by the Commission to the White House Office of Information and Regulatory Affairs on 28 September 2026.
Federal and State Regulatory Conflict
Prediction market regulation has become a major source of controversy within the US gambling industry.
While the CFTC maintains that event contracts fall under federal jurisdiction, several states argue that certain products, particularly sports-related contracts, should comply with state gambling laws.
The dispute has direct implications for platforms offering contracts based on sporting outcomes.
The central legal question concerns when an event contract should be classified as a financial derivative and when it should be treated as a wager subject to state gambling regulation.
Diverging Federal Court Interpretations
The regulatory controversy has also produced differing judicial interpretations.
The Third and Ninth US Circuit Courts of Appeals have adopted contrasting positions regarding the classification and oversight of event contracts.
These differences have increased legal uncertainty for prediction market operators and regulators.
The absence of a consistent nationwide interpretation could ultimately require intervention by the US Supreme Court.
Kalshi Dispute Could Reach the Supreme Court
The Supreme Court is considering whether to hear a petition filed by New Jersey in Flaherty vs. KalshiEX.
The case concerns regulatory authority over prediction markets, particularly contracts linked to sporting events.
Gaming regulators from 39 states and the District of Columbia, together with the National Football League (NFL), have urged the Court to consider the dispute.
A ruling could have substantial consequences for the operation and regulation of prediction market platforms throughout the United States.
NFL Calls for State-Level Oversight
The NFL has expressed concerns about the growing availability of sports-related event contracts through prediction market platforms.
The league argues that state authorities are better positioned to supervise these products through established consumer protection systems and sporting integrity controls.
It has also warned that differences between federal and state regulatory frameworks could allow certain operators to offer products without meeting the same requirements as conventional sportsbooks.
The organisation has called for a judicial determination clarifying the respective responsibilities of federal and state regulators.
Impact on Prediction Markets
The CFTC’s proposals could significantly influence the regulatory environment for platforms offering contracts linked to future events.
Recognising these contracts as swaps would strengthen arguments supporting federal supervision.
However, the exclusion of conventional gambling also establishes an explicit boundary between financial derivatives and traditional betting products.
This distinction is particularly relevant to sports-related contracts, where financial market instruments and gambling products can share similar characteristics.
The outcome of ongoing legal proceedings will remain important in determining the practical scope of the proposed measures.
Next Steps and Impact
The CFTC’s two regulatory measures represent an effort to establish greater legal clarity for prediction markets in the United States.
The proposed classification of event contracts as swaps could reinforce federal authority, while the exclusion of traditional gambling maintains a regulatory distinction between prediction market platforms and conventional sportsbooks and casinos.
Key developments to monitor include the publication of the interim final rule, the 30-day public consultation periods and the Supreme Court’s possible intervention.
The evolving dispute between federal and state authorities will play a decisive role in determining the future of sports-related event contracts and their relationship with the regulated US gambling industry.
Editó: @fonta
