Meta description: CFTC issued swap-definition rules for event contracts after OIRA review, setting 30-day comments and sharpening state preemption fights.

Tags: CFTC, Kalshi, Polymarket, OIRA, Event Contracts, Sports Betting

market_platform: none-if-cross-platform

category: Regulation

The Commodity Futures Trading Commission issued two event-contract rulemaking actions on October 9, moving from White House review to public releases that sharpen the federal-state fight over prediction markets. One proposal would define certain event contracts as swaps. A separate interim final rule would exclude casino-style gambling products from the swap definition.

The actions follow a fast Office of Information and Regulatory Affairs review. Reginfo.gov records show OIRA received RIN 3038-AF82, titled “Further Definition of ‘Swap’ to Include Event Contracts,” and RIN 3038-AF81, titled “Further Definition of ‘Swap’ to Exclude Casino-Style Gambling Products,” on September 28 and concluded both reviews on October 9 with the action “Consistent with Change.”

The CFTC’s Release 9310-26 says the notice of proposed rulemaking would expressly further define “swap” to include event contracts, including contracts based on sports, politics, culture and weather. The same release says written comments are due within 30 days of publication in the Federal Register.

The CFTC’s Release 9309-26 says the interim final rule codifies the agency’s position that casino-style gambling products, including sportsbook wagers and casino games, are excluded from the swap definition. The CFTC said the interim final rule will be effective immediately upon Federal Register publication, with written comments due within 30 days of publication.

What did the CFTC issue on event contracts?

The CFTC issued two related but distinct actions. The first is a proposed rule for event contracts that trade in prediction-market form. The second is an interim final rule drawing a line around casino-style gambling products that the agency says are not swaps.

That distinction matters because the CFTC is trying to define the federal derivatives perimeter while state gambling regulators are pressing the opposite view in court. If an event contract is a swap traded on a federally regulated market, the platform argument is that the Commodity Exchange Act gives the CFTC exclusive jurisdiction. If the product is treated as gambling, state licensing, age, geolocation, tax and consumer-protection rules can come into play.

CFTC Chairman Michael S. Selig framed the proposed rule as a jurisdictional clarification. In Release 9310-26, Selig said event contracts are “commodity derivatives” within the CFTC’s regulatory authority under the Commodity Exchange Act and within the agency’s exclusive jurisdiction. In Release 9309-26, he drew the other side of the line, saying casino-style gambling products are not derivatives.

The pair of actions gives the agency a formal rulemaking vehicle for arguments it has already advanced in litigation involving Kalshi, Polymarket and state officials. It does not, by itself, end the lawsuits. Courts have already split over whether sports-event contracts qualify as swaps and whether the Commodity Exchange Act preempts state gambling laws.

Why does the swap definition matter for Kalshi and Polymarket?

The swap definition matters because it determines whether prediction-market contracts sit primarily inside the CFTC’s federal derivatives regime or remain exposed to state gambling enforcement. Kalshi has argued in several cases that its sports-event contracts are federally regulated products listed on a designated contract market, not state-regulated sports wagers.

Federal courts have not answered that question uniformly. In New Jersey, the Third Circuit ruled for Kalshi in KalshiEX LLC v. Flaherty, affirming preliminary relief against state enforcement. In Nevada, the Ninth Circuit reached the opposite result in KalshiEX LLC v. Assad, holding that Kalshi had not shown a likelihood that the Commodity Exchange Act preempts Nevada gaming regulations as applied to sports-event contracts.

The Sixth Circuit added another state-favorable ruling on September 25. In KalshiEX LLC v. Schuler and KalshiEX LLC v. Orgel, the court held that Kalshi had not shown its sports-event contracts qualify as swaps under the Commodity Exchange Act. The panel affirmed the denial of preliminary relief in Ohio, vacated the preliminary injunction Kalshi had obtained in Tennessee and remanded both cases for further proceedings.

The Sixth Circuit focused on whether the sports outcomes at issue were connected to financial, economic or commercial consequences in the statutory sense. The court concluded Kalshi’s sports-event contracts did not meet that definition and also held, in the alternative, that the Commodity Exchange Act did not expressly or impliedly preempt Ohio and Tennessee gambling laws.

How are state cases splitting across the country?

The state-by-state picture remains uneven. In Minnesota, U.S. District Judge Katherine Menendez granted preliminary injunctions requested by the CFTC, Kalshi and Polymarket on July 27, blocking enforcement of Minnesota’s prediction-market statute while the case proceeds. The order in United States v. Minnesota said the statute was likely preempted at least in part because it would reach event contracts that appear to fit the Commodity Exchange Act’s swap definition.

In New York, U.S. District Judge Analisa Torres denied Kalshi’s request for a preliminary injunction on July 7. Her order in KalshiEX LLC v. Williams held that New York gambling laws, as applied to Kalshi’s sports-event contracts, are not preempted by the Commodity Exchange Act at that stage of the case.

The same legal fight has produced different results because courts are reading the Commodity Exchange Act’s exclusive-jurisdiction language, its swap definition and its event-contract provisions differently. The Third Circuit treated federal regulation as controlling in New Jersey. The Ninth and Sixth Circuits allowed Nevada, Ohio and Tennessee to proceed with state gambling enforcement against sports-event contracts. Minnesota remains a preliminary district-court win for the federal preemption theory, while New York is a district-court loss for Kalshi.

What happens next in the rulemaking?

The next concrete milestone is Federal Register publication. The CFTC said comments on the proposed event-contract swap rule must be received within 30 days of that publication, and comments on the interim final rule excluding casino-style gambling products must also be received within 30 days of publication.

The interim final rule has a faster operative path because the CFTC said it becomes effective immediately upon Federal Register publication. The proposed rule covering event contracts still has to move through notice-and-comment procedures before the agency can finalize it.

The rulemaking now runs alongside active litigation rather than replacing it. Courts will still decide the cases before them, including disputes over whether state gambling laws can be enforced against sports-event contracts already listed on federally regulated markets. The CFTC’s October 9 releases give the agency a formal regulatory record for its position, but the immediate calendar turns on Federal Register publication and the two 30-day comment windows that follow.