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Key Takeaways
- The CFTC submitted a proposed rule defining event contracts as swaps and an interim final rule excluding gambling products, aimed at platforms like Kalshi, Polymarket, Crypto.com and Robinhood.
- The move follows conflicting rulings from the Sixth, Eighth and Third Circuit Courts of Appeals on whether the CFTC holds jurisdiction over sports-related event contracts.
- Chairman Mike Selig is acting as the CFTC’s sole sitting commissioner, driving the agency’s regulatory push as state lawsuits against Kalshi over alleged illegal gambling continue to proliferate.
The Commodity Futures Trading Commission has submitted two rules to the White House Office of Management and Budget that would formally define prediction market event contracts as swaps and separate them from gambling products.
The filings land as the agency fights a wave of state lawsuits arguing that sports-related event contracts on platforms including Kalshi amount to unregulated gambling.
Two Rules, Two Different Paths to Effect
The CFTC is pursuing a proposed rule that would extend the regulatory definition of swaps to cover event contracts traded on platforms including Kalshi, Polymarket, Crypto.com and Robinhood.
It is separately pursuing what is known as an interim final rule that would remove what the agency has called casino-style gambling products from the category of instruments that can qualify as a swap.
The two rule types follow different paths. A standard proposed rule typically opens for public comment before taking effect. An interim final rule takes effect immediately upon publication while still remaining open for public input and later revision, giving the CFTC a faster route to establishing its position than the standard rulemaking process would allow.
Both rules were received by the Office of Management and Budget this week, a stage that generally precedes formal publication for public comment.
The CFTC’s disclosed submissions, dated Sept. 28, do not include the specific text of either rule, and the agency classified both as not economically significant, a designation under federal rulemaking procedure that can affect the level of review a rule receives.
A Direct Response to a Widening Circuit Split
The CFTC’s move follows a string of conflicting federal appellate rulings on whether event contracts fall under its jurisdiction. The U.S. Sixth Circuit Court of Appeals ruled last week that sports-related contracts on Kalshi are not swaps and are subject to state gambling regulation, and the Eighth Circuit Court of Appeals reached a similar conclusion in a separate ruling.
The Third Circuit Court of Appeals had previously found that the CFTC holds proper jurisdiction over prediction markets, leaving federal courts split on the underlying question.
If the CFTC’s rules take effect, formally classifying event contracts as swaps while explicitly excluding gambling products from that same category, it could undermine the legal basis for state lawsuits arguing that platforms such as Kalshi are operating illegal gambling businesses.
Those lawsuits have proliferated across multiple states, with Kalshi named as a defendant in the large majority of cases.
An Agency Acting Through a Single Commissioner
The CFTC is structured as a five-member commission, but no additional commissioners have been nominated to join Chairman Mike Selig, leaving him as the agency’s sole sitting member.
That vacancy has left Selig acting unilaterally on the regulatory and policy decisions that would typically involve a full commission vote, including the agency’s aggressive litigation posture defending what he has argued is the CFTC’s exclusive jurisdiction over prediction markets.
The unresolved circuit split raises the prospect that the U.S. Supreme Court could eventually take up the underlying jurisdictional question, since conflicting rulings across multiple appellate circuits are among the circumstances that can prompt the high court to intervene, though no party has yet petitioned for that review in connection with these specific cases.
Part of a Broader CFTC Regulatory Push
The event contract rules follow a separate, previously submitted CFTC filing to the White House focused on broader crypto regulations, an early-stage filing known as a prerule that the agency has not yet described in detail.
Taken together, the filings reflect a CFTC continuing to advance its regulatory agenda through existing rulemaking authority even as broader federal crypto and prediction-market legislation remains unresolved in Congress.
