CFTC Defends Prediction Markets Turf with New ‘Swap’ Definition

The Commodity Futures Trading Commission proposed defining financial swaps to explicitly include event contracts based on sports, politics, culture and weather-related wagers as the legal fight escalates over the booming prediction markets industry.

The agency, led Chairman Michael Selig, has aggressively defended itself as the sole regulator of the industry, which allows users to trade so-called event contracts on platforms like Kalshi and Polymarket. States and tribes, however, have argued prediction markets are illegal gambling operations that shirk state tax and gaming laws.

The dispute is now likely headed to the Supreme Court after a split among regional federal appellate courts.

Read More: Kalshi Speeds Toward Supreme Court Showdown Over Sports Betting

“Americans use event contracts to hedge risks, speculate, and provide the public with information about the outcome of future events,” Selig said in a statement on Friday.

In a separate measure, the agency said casino-style gambling products and wagers on sportsbooks explicitly are excluded from the definition of a swap. The CFTC issued the amendment to the definition via an interim final rule, saying it did so “in the context of the ongoing debate” over the agency’s jurisdiction over event contracts.

That measure will go into effect as soon as it is published in the Federal Register but the regulator also will accept public feedback on it for 30 days. US-regulated prediction markets allow users to place wagers on just about anything, from sports to geopolitical events, but do not typically offer casino-style games of pure chance.

Better Markets, a Washington think tank that has criticized the CFTC’s embrace of prediction markets, called Friday’s moves an example of the agency becoming a “cheerleader” for prediction markets.

“Calling it an event contract does not magically transform it into a financial derivative,” Benjamin Schiffrin, the group’s director of securities policy, said in a statement. “Contrary to what Kalshi and the CFTC say, nobody ‘trades’ on sports. They bet on sports, and that is what event contracts on sporting events enable people to do.”

A spokesperson for Kalshi didn’t immediately respond to a request for comment.