U.S. CFTC seeks event contract definitions that may defy states' gambling claims
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Summary
The U.S. Commodity Futures Trading Commission (CFTC), led by Chairman Mike Selig, has submitted regulatory plans to the White House to classify prediction markets’ event contracts as “swaps,” explicitly separating them from gambling. This position challenges states’ claims that platforms like Kalshi’s sports-related trades are unregulated gambling and contradicts recent federal court rulings. The proposed rules include extending the definition of swaps to cover event contracts and removing casino-style gambling products from swaps.
Why it matters
If event contracts are formally recognized as swaps and not gambling, it could invalidate states’ lawsuits against prediction market companies, which accuse them of running illegal gambling operations. The CFTC’s regulatory stance could shift jurisdiction power over prediction markets firmly to the federal level, affecting ongoing legal battles and regulatory treatment of these contracts.
Key context
The CFTC defines swaps as financial instruments involving an agreement between two parties. Prediction markets trade binary yes-or-no bets on measurable events, such as sports outcomes or elections. Some federal appellate courts have ruled Kalshi’s sports contracts are not swaps and fall under state gambling laws, while others have sided with the CFTC’s jurisdiction claim, creating a legal conflict that might reach the U.S. Supreme Court. Chairman Selig is currently the CFTC’s sole commissioner and has been acting unilaterally on these issues.
Key numbers and entities
The main entities involved are the U.S. Commodity Futures Trading Commission, Chairman Mike Selig, the White House Office of Management and Budget (OMB), prediction market platforms Kalshi, Polymarket, Crypto.com, and Robinhood. The Sixth and Eighth Circuit Courts of Appeals ruled that Kalshi’s contracts are not swaps, whereas the Third Circuit ruled in favor of CFTC jurisdiction.
What remains unclear
The exact language and provisions of the proposed rules submitted to the OMB are not disclosed, nor are the detailed plans of the CFTC’s crypto regulation prerule. The source does not clarify how states or the broader industry might respond to the forthcoming rules or the timeline for public comment and implementation.