What to Know
- The U.S. Commodity Futures Trading Commission has submitted two related rule plans to the White House’s Office of Management and Budget for review.
- One proposal would extend the regulatory definition of swaps to include event contracts traded on prediction market platforms.
- A second interim final rule would seek to remove casino-style gambling products from what can make up a swap.
- The rules arrive as the CFTC is battling states over whether certain sports-linked prediction market contracts are federally regulated derivatives or state-regulated gambling products.
- Kalshi, Polymarket, Crypto.com and Robinhood are among platforms tied to the broader market for event contracts.
- Recent federal court decisions have split over whether sports-tied Kalshi contracts qualify as swaps and whether the CFTC has proper jurisdiction.
- The White House review requests are dated September 28 and were described by the agency as not economically significant.
- The CFTC is currently operating with Chairman Mike Selig as its lone member, after President Donald Trump has not yet nominated additional commissioners.
- OMB disclosures also show a recently submitted CFTC prerule focused on crypto regulations, though no detailed contours were provided.
CFTC Seeks Firmer Ground Over Event Contracts
The U.S. Commodity Futures Trading Commission is moving to sharpen the legal framework around prediction markets, sending two closely linked regulatory plans to White House review as disputes intensify over whether event contracts should be treated as federally supervised derivatives or as gambling products subject to state control.
The agency’s latest step centers on the definition of swaps, a core category of derivatives regulated by the CFTC. One rule would formally connect event contracts to the regulatory definition of swaps, while another would state that casino-style gambling products are not part of what can make up a swap. Together, the moves signal a more assertive federal posture at a time when prediction market firms face lawsuits and enforcement pressure from states that view some sports-linked contracts as illegal gambling.
Event contracts are generally structured as binary yes-or-no markets tied to measurable outcomes. These products can involve questions around sporting events, elections or other observable situations. In the CFTC’s emerging view, the relevant question is whether such contracts function as derivatives under federal law rather than as wagers governed by state gambling authorities.
Why Swap Status Matters
Classifying event contracts as swaps would carry major legal consequences. Swaps are agency-regulated financial instruments in which two parties agree to an exchange. If event contracts fall within that definition, prediction market operators could argue that they are operating under a federal derivatives framework rather than a patchwork of state gambling regimes.
That distinction is central to the current legal fight. States challenging platforms such as Kalshi have argued that sports-related event contracts are essentially unregulated gambling when offered within their borders. The CFTC’s regulatory push could undermine that claim by placing these products more clearly inside federal derivatives law and outside the category of casino-style gambling.
The second rule plan is particularly significant because it is being pursued as an interim final rule. In regulatory practice, that kind of measure can become immediately effective while still remaining open for public input and later revision. If adopted in that form, it could quickly alter the legal landscape surrounding prediction markets even as lawsuits continue.
White House Review Marks a Key Step
Both rule plans have been received by the White House’s Office of Management and Budget. OMB review is generally one of the final steps before rules are released for public comment. The disclosures tied to the review requests are dated September 28, but they do not include the detailed text of the proposed rules.
The CFTC described both rules as not economically significant. That designation does not make the policy fight less important, but it indicates the agency is not presenting the proposals as rules with the kind of broad economic impact that would trigger a heavier review category.
For market participants, the absence of rule text means the exact mechanics remain unknown. Still, the direction is clear enough to matter: the CFTC is attempting to define event contracts more explicitly within its own regulatory perimeter while separating them from gambling terminology that could strengthen state-level cases.
Prediction Markets Face Conflicting Court Rulings
The CFTC’s latest regulatory push comes after a series of conflicting federal court developments. The most recent federal court decision explicitly ruled that Kalshi’s sports-tied contracts are not swaps and are subject to state gambling regulations. That decision stands in contrast to an earlier federal ruling that reached a different conclusion.
Last week, the U.S. Sixth Circuit Court of Appeals issued a ruling that sports bets on Kalshi are not swaps. The Eighth Circuit Court of Appeals reached a similar conclusion in its own ruling. At the same time, the Third Circuit decided that the CFTC had proper jurisdiction over prediction markets, leaving a clear split at the federal level.
Such a legal rift increases the possibility that the U.S. Supreme Court could eventually be asked to resolve the issue. Until then, the CFTC and state regulators are likely to continue pressing their competing theories in court, with prediction market firms caught in the middle.
States Challenge the Federal Oversight Model
State authorities have argued that certain event contracts, especially those linked to sports, resemble gambling products and should be governed by state gambling rules. That position has placed them in direct conflict with the CFTC, which has embraced the role of federal regulator for prediction markets and the event contracts those markets list.
The CFTC has actively engaged in litigation tied to these disputes, regularly suing states as it defends the idea that prediction markets fall within its sole jurisdiction. Chairman Mike Selig has argued for the agency’s authority over the sector, and the new rule plans appear designed to strengthen that position through formal regulation rather than case-by-case courtroom arguments alone.
If the rules are eventually adopted, states may still challenge them. But a formal CFTC definition could give prediction market companies a clearer basis to argue that they are subject to federal oversight. That could be especially important for platforms seeking to offer event contracts across multiple states without navigating conflicting local gambling claims.
Kalshi, Polymarket, Crypto.com and Robinhood in Focus
The broader market for event contracts includes platforms such as Kalshi, Polymarket, Crypto.com and Robinhood. These firms operate in different corners of the prediction market and trading ecosystem, but all are connected to the broader debate over whether event-based contracts should be treated as financial products, betting products or something in between.
Kalshi has become a recurring name in litigation because of state challenges to its sports-linked contracts. Polymarket is widely associated with prediction markets, particularly among digital-asset users. Crypto.com and Robinhood also represent the convergence of retail trading, financial technology and event-based market products.
For users, the legal classification of these products could affect what contracts are available, where they can be offered and how platforms must structure compliance. For the platforms, the stakes include market access, regulatory certainty and the ability to scale nationally under a federal framework rather than facing separate state-by-state restrictions.
Leadership Structure Adds to the Debate
The CFTC is designed as a five-member commission, but it is currently operating with Chairman Mike Selig as its lone member. President Donald Trump has so far not nominated other commissioners, leaving Selig to act unilaterally on regulatory and policy decisions.
That unusual structure adds another layer to the debate. While the agency is continuing to advance policy, critics may focus on the fact that major regulatory decisions are being pursued by a commission that lacks its full membership. Supporters of the CFTC’s approach may counter that the agency still has a mandate to oversee derivatives markets and clarify rules for emerging products.
The prediction market fight is therefore not only about event contracts. It also raises questions about agency authority, federal versus state oversight and how quickly regulators should adapt existing financial laws to products that blur the line between trading and wagering.
Crypto Prerule Also Appears in OMB Disclosures
OMB disclosures also show that the CFTC recently submitted a prerule focused on crypto regulations. The agency did not describe the contours of that effort, so the specific scope remains unclear.
The crypto prerule is separate from the event-contract measures, but its appearance underscores how the CFTC is positioning itself across markets that involve new trading venues, retail participation and novel contract structures. In both prediction markets and digital assets, regulators are trying to determine where existing statutory categories apply and where new clarification may be needed.
For crypto market participants, the reference to a CFTC prerule is worth monitoring, even without details. The agency’s future approach could influence how crypto-linked products are defined, supervised and offered in the United States.
What Comes Next for Prediction Markets
The immediate next step is White House review of the submitted rule plans. If the proposals move forward, the CFTC can release text that clarifies exactly how it intends to define event contracts and distinguish swaps from casino-style gambling products.
Public comment would then become a critical venue for platforms, state regulators, legal experts and market participants. In the case of the interim final rule, the measure could become effective immediately while still being open to revision. That would place even more urgency on responses from affected parties.
The outcome could reshape the prediction market sector. A stronger federal definition may support broader availability of event contracts, while adverse court rulings or successful state challenges could limit offerings tied to sports and other contested categories. Until the courts and regulators converge, uncertainty is likely to remain a defining feature of the market.
Frequently Asked Questions (FAQs)
What did the CFTC send to White House review?
The CFTC sent two related rule plans to the White House’s Office of Management and Budget. One would extend the regulatory definition of swaps to include event contracts, and the other would seek to exclude casino-style gambling products from what can make up a swap.
Why are event contracts controversial?
Event contracts are controversial because they can resemble both financial derivatives and wagers on real-world outcomes. States have argued that some sports-linked contracts should be treated as gambling, while the CFTC is pushing to regulate them as federally supervised market products.
What is a swap in this context?
A swap is an agency-regulated financial instrument in which two parties agree to an exchange. The CFTC’s proposal would make event contracts part of that regulatory definition, potentially placing them more firmly under federal derivatives oversight.
Which platforms are connected to this debate?
Kalshi is central to several legal disputes, while Polymarket, Crypto.com and Robinhood are also connected to the broader event-contract and prediction market landscape. The regulatory outcome could affect how such platforms list and offer event-based markets.
How have federal courts ruled so far?
Federal courts have not reached a single consistent position. The Sixth Circuit and Eighth Circuit ruled that sports bets on Kalshi are not swaps, while the Third Circuit decided that the CFTC had proper jurisdiction over prediction markets.
Could the Supreme Court get involved?
The split among federal appellate courts raises the possibility that the U.S. Supreme Court could eventually be asked to decide the issue. No final nationwide resolution has emerged from the courts so far.
What does an interim final rule mean?
An interim final rule can become effective immediately while still remaining open for public input and revision. That makes the CFTC’s second rule plan especially important for platforms and states involved in the current legal battle.
Why does the CFTC’s leadership structure matter?
The CFTC is legally designed as a five-member commission, but Chairman Mike Selig is currently its lone member because President Donald Trump has not nominated other commissioners. That means major regulatory and policy decisions are being advanced under an unusually concentrated leadership structure.
Is this directly a crypto regulation story?
The main issue is prediction market regulation, not a specific crypto asset. However, OMB disclosures also show a separate CFTC prerule focused on crypto regulations, and some platforms tied to prediction markets operate within the broader digital-asset trading ecosystem.