CFTC defines event contracts as swaps and carves out casino gambling

The US Commodity Futures Trading Commission (CFTC) issued two documents on prediction markets on Friday, October 9. The first proposes writing event contracts into the definition of a "swap", and the second immediately carves casino bets out of it. The outcome decides whether a federal agency or the states will supervise Kalshi and Polymarket.

What exactly did the CFTC publish?

There are two documents, and they push in opposite directions. The first, a proposed rule, is open for public comment. It expressly extends the term "swap" to contracts tied to sports, politics, cultural events and weather. The CFTC argues these are instruments "commonly known to the trade as swaps", so there is no ambiguity.

The second document, an interim final rule, takes effect on publication. It records the agency's long-held view that casino games and sportsbook wagers are not derivatives. Both acts carry 30-day comment windows.

Both acts formalize proposals the CFTC sent to the White House in late September. It is part of a broader push, and the agency is cementing its authority on its own instead of waiting for Congress to pass a prediction market law.

What is an event contract, and where does a swap come in?

An event contract is a deal with two possible endings. For example, "Bitcoin will close the week above a given level" or "the candidate wins the election". If the event happens, the contract pays a fixed sum, if not, zero. Kalshi settles in dollars, Polymarket in USDC.

Under US law, a swap is a contract in which the parties exchange payments depending on a future event or metric. That is why the agency's lawyers see a derivative structure in a bet on a match result, not a lottery ticket.

Such contracts trade daily on Kalshi and Polymarket, which list markets on sports, elections, weather and cultural events. The platforms gain if the CFTC is the single supervisor, because that means one federal regulator instead of fifty state ones.

Why does the label matter so much?

It all comes down to jurisdiction. If a contract is a swap, the CFTC regulates it, and chairman Michael Selig argues that it alone does. Platforms like Kalshi and Polymarket then sit beyond the reach of state gambling regulators. If it is gambling, states can demand licenses, shut markets and sue operators.

The balance of power today looks like this.

• The CFTC position: event contracts are swaps under federal oversight, and states cannot ban them.
• Several states call sports bets on these platforms illegal gambling and have already sued operators.
• The agency countersued to defend its turf.
• In the courts the score is nearly even, since one federal appellate ruling sided with the CFTC, two with the states.

The NFL filed a document with the Supreme Court calling sports contracts on such platforms gambling, not swaps. So the fight is not only between the states and the CFTC, but also with the big sports leagues.

Is that enough to end the dispute?

Unlikely. TD Cowen analyst Jaret Seiberg told clients the interim rule is meant to improve the CFTC's position in court. The states argue that under the agency's definition, any wager at a casino or sportsbook would become federally illegal. Whether the move works, he said, is a separate question.

"Casino-style gambling products are not derivatives."

- Michael Selig, CFTC chairman, from the agency's statement of October 9, 2026

There is also a procedural detail. Selig is the only commissioner on a body designed for five, so he decides alone. Trump has not yet named new members. Both documents went to the White House for review less than two weeks before publication, so the process moved fast.

Trust in the markets themselves is also in question. Kalshi is investigating bets on the pick for Trump's press secretary that were placed before the official announcement, the Wall Street Journal reported. Stories like that hand the states extra arguments.

What comes next?

First 30 days of comments, after which the CFTC may adopt the proposal in final form. In parallel, the case has already drawn the attention of the US Supreme Court, where the NFL and others lined up against Kalshi, and the states filed their positions there. The last word may well belong to the justices rather than the regulator.

This is not abstract for the crypto market either. Blockchain.com is asking the CFTC for approval to run prediction markets and derivatives trading in the US. The clearer the federal frame, the fewer such applications get stuck in the fight over state licenses. The agency has already issued no-action letters allowing crypto apps to offer regulated derivatives, and is moving separate rules for crypto markets.

The next concrete step is known. The comment period ends 30 days after publication. Then it will be clear whether the CFTC won industry support and whether the states are ready to answer with new lawsuits.