CFTC Moves to Classify Prediction Market Event Contracts as Swaps

The US Commodity Futures Trading Commission is pushing to expand the legal definition of a "swap" to explicitly include event contracts, escalating its jurisdictional fight over prediction markets. According to an Office of Information and Regulatory Affairs docket, the agency has submitted a proposed rule redefining swaps to cover event-based contracts, alongside an interim final rule that would exclude traditional casino-style gambling products. Both rules remain under federal review.

The classification is central to the CFTC's argument that federal law grants it exclusive authority over swaps traded on regulated derivatives exchanges, a position that directly applies to prediction market operators Polymarket and Kalshi. State regulators have pushed back sharply, maintaining that sports-linked event contracts fall under state gambling laws and should be regulated accordingly rather than overseen by federal commodity regulators.

The regulatory standoff has already produced significant legal setbacks for the industry. Kalshi recently lost an appeal challenging state-level restrictions on its sports event contracts, a ruling that could tee up a US Supreme Court case on the boundary between federal derivatives authority and state gambling oversight. The CFTC's pending rulemaking signals the agency is preparing to reinforce its own jurisdictional position even as courts weigh in.

Prediction markets have grown rapidly in recent years, drawing both retail speculators and institutional attention as platforms tied to real-world events such as elections, sports, and macroeconomic outcomes. With the proposed swap redefinition and interim gambling carve-out now in federal review, the CFTC appears to be laying the groundwork for a clearer, federally enforced framework that could reshape how prediction platforms operate across the United States.