The U.S. Commodity Futures Trading Commission has issued two regulatory measures defining federal oversight of prediction markets. The first expands the definition of a swap to include event contracts — wagers on cultural events, weather, politics and sports. The second, effective immediately upon publication in the Federal Register, confirms that casino products and betting operator offerings do not qualify as swaps.
'Americans use event contracts to hedge risk, speculate, and gain information about future events,' CFTC Chairman Michael Selig said. He stressed that such contracts are commodity derivatives under the agency's exclusive jurisdiction per the Commodity Exchange Act. Casino and sportsbook wagers, he added, 'are not derivatives' and fall outside CFTC authority.
Both documents were published on Friday and open for comment for 30 days. The CFTC submitted the proposals to the White House on 28 September. The move comes as a legal dispute heads toward the Supreme Court. The CFTC claims exclusive federal authority; states argue that sports event contracts fall under their remit. The Third and Ninth Circuit courts of appeals have taken opposing positions on whether such contracts qualify as swaps.
The Supreme Court is reviewing a petition from New Jersey in Flaherty vs. KalshiEX. Gaming regulators from 39 states and the District of Columbia, together with the NFL, have urged the court to hear the case. The league argues that states are better positioned to oversee sports event contracts, citing consumer protection and competition integrity. NFL attorneys warned that without clarity, prediction market operators will continue to 'exploit the gap between federal and state regulation.'
