CFTC Seeks to Include Event Contracts in Swap Definition to Clarify Prediction-Market Jurisdiction

The U.S. Commodity Futures Trading Commission is moving to clarify the definition of a swap as it remains locked in a jurisdictional dispute with state gambling regulators over prediction markets.

Bloomberg reported on October 30 that the Office of Information and Regulatory Affairs' review list shows the CFTC submitted a proposed rule to broaden the definition of swaps to include event contracts. A separate interim final rule to exclude casino-style gambling products from the swap category is also under review.

Whether event contracts are classified as swaps matters because it could determine regulatory authority over prediction markets. The CFTC has maintained that, under federal law, it has exclusive jurisdiction over swaps traded on exchanges it oversees.

As a result, a key question is whether federal regulation would take precedence for event contracts on prediction-market platforms such as Polymarket and Kalshi that operate under the CFTC's regulatory framework.

State regulators, however, have disputed the CFTC's interpretation. In particular, they argue that event contracts tied to the outcomes of sporting events are gambling rather than financial products and should therefore be governed by each state's gambling laws and regulations.

If finalized, the proposal would more clearly define the boundary between event contracts and casino-style gambling products. It would also help clarify the division of regulatory jurisdiction between the federal government and state governments over prediction markets.