The Commodity Futures Trading Commission proposed on October 9, 2026, to define certain event contracts as swaps under the Commodity Exchange Act, including contracts tied to sports, politics, cultural events and weather. The proposal arrived while Kalshi is asking the Ninth Circuit to revisit an August ruling that rejected its preemption theory for sports-event contracts.
Meta description: CFTC proposes defining event contracts as swaps while Kalshi seeks Ninth Circuit rehearing over sports contracts and state gaming laws.
Tags: CFTC, Kalshi, Ninth Circuit, Nevada, sports event contracts, prediction markets
market_platform: Kalshi
category: Regulation
What did the CFTC propose on October 9?
The CFTC said in Release No. 9310-26 that it had approved a notice of proposed rulemaking to clarify that the Commodity Exchange Act’s swap definition includes certain event contracts based on sports, politics, cultural events and weather-related events. The agency framed the proposal as an attempt to remove ambiguity over products that trade on the outcome of future events.
Chairman Michael S. Selig said in the CFTC release that “Americans use event contracts to hedge risks, speculate, and provide the public with information about the outcome of future events.” He also said the products fall “squarely within the CFTC’s regulatory remit.”
The proposal is directed at the legal classification of event contracts, a threshold issue in the fight between federally regulated prediction-market exchanges and state gambling regulators. If finalized, the rule would give the CFTC a formal regulatory position that covered event contracts are swaps, but it would not automatically end litigation over how federal commodities law interacts with state gaming statutes.
The CFTC said comments are due 30 days after the notice is published in the Federal Register. The agency directed commenters to submit feedback through Regulations.gov.
The commission also approved a companion interim final rule in Release No. 9309-26 addressing the treatment of certain gaming products. That rule codifies the CFTC’s position that sportsbook wagers, casino games and similar products are not swaps under the Commodity Exchange Act. The two actions together attempt to draw a regulatory line between event contracts listed on CFTC-regulated markets and traditional gambling products.
Why is Kalshi asking the Ninth Circuit for rehearing?
Kalshi is seeking rehearing after a three-judge Ninth Circuit panel ruled against it in August in litigation over sports-event contracts and Nevada gaming law. The panel held that the Commodity Exchange Act did not give Kalshi the preemption ruling it sought against state enforcement, even though Kalshi operates as a federally regulated designated contract market.
The dispute turns on both the meaning of “swap” and the scope of the CFTC’s exclusive jurisdiction. Kalshi has argued that event contracts fall within the Commodity Exchange Act because the statute covers agreements dependent on the occurrence, nonoccurrence or extent of an event associated with a potential financial, economic or commercial consequence. State officials have argued that sports-event contracts remain subject to state gambling laws and that federal commodities regulation does not displace those laws in the way Kalshi claims.
The Ninth Circuit ruling was a significant setback for Kalshi because it rejected the broad preemption theory the company has used against state regulators. Kalshi has asked the court to rehear the case en banc, meaning before a larger group of Ninth Circuit judges rather than the original three-judge panel.
Kalshi’s petition argues that the panel’s decision conflicts with the Commodity Exchange Act’s text and creates an important split over the reach of federal preemption for contracts traded on CFTC-regulated exchanges. States opposing Kalshi’s position argue that the panel properly separated federal market regulation from state authority over gambling activity.
What role does the CFTC rulemaking play in Kalshi’s request?
Kalshi pointed the Ninth Circuit to expected CFTC action in a September 25 letter, asking the court either to grant rehearing or to hold the rehearing petition while the agency considered revisions to 17 CFR 40.11. That regulation governs the CFTC’s review of event contracts involving activities such as gaming, war, terrorism, assassination and other matters listed in the rule.
The request gives Kalshi another argument for delay or reconsideration: the federal regulator was preparing to address the regulatory treatment of event contracts while the court was deciding whether to revisit the panel ruling. Kalshi has a direct commercial stake in that outcome, and its letter asked the court to consider the agency process before closing the door on rehearing.
The distinction matters because the Ninth Circuit panel focused on statutory interpretation and preemption, not merely the wording of a CFTC regulation. A proposed agency rule can matter to the policy and regulatory backdrop, but a court still must decide what the Commodity Exchange Act means and whether it overrides state gaming law in the circumstances before it.
How is Nevada responding?
Nevada opposes Kalshi’s request to delay the case. Nicole Saharsky of Mayer Brown, representing Nevada, argued that revising Section 40.11 would not change the result because the panel relied on the text, context and purposes of the Commodity Exchange Act. She characterized Kalshi’s request as another attempt to delay the case while the company continues operating in the state.
Nevada’s position is that the CFTC’s regulatory activity does not erase the panel’s statutory holding. A proposed rule defining certain event contracts as swaps may strengthen the agency’s public position, but Nevada argues that it cannot rewrite the Commodity Exchange Act or determine the preemption question by itself.
That is the administrative-law issue underneath the procedural fight. Agencies can interpret and implement statutes within their authority, but courts decide statutory meaning in litigation. The Ninth Circuit now has to determine whether the CFTC’s rulemaking is relevant enough to justify rehearing or delay.
What does this mean for other platforms and state regulators?
The CFTC proposal matters beyond Kalshi because it addresses how federal commodities law treats event contracts as a product category. Polymarket’s U.S. plans, exchange partnerships, sports-related event contracts and brokerage distribution models all depend in different ways on where regulators draw the line between event contracts and gambling.
State regulators have focused especially on sports contracts, where the overlap with gambling law is most direct. Their argument is that a contract tied to a sports outcome can implicate state gaming statutes even if it is listed through a federally regulated market structure. The CFTC’s proposal pushes in the opposite direction by treating covered event contracts as swaps and placing them within the agency’s regulatory perimeter.
Sportsbook operators such as DraftKings and FanDuel have explored or announced event-contract strategies as the prediction-market sector moves closer to sports betting, brokerage and derivatives infrastructure. Robinhood has also offered event contracts, though it is not a sportsbook operator. The legal consequences for each company may depend on the exact product design, exchange relationship, clearing arrangement and state-by-state regulatory posture.
That complexity is why the CFTC rulemaking and the appellate cases are moving on parallel tracks. The agency can define the federal treatment of products under its jurisdiction, while courts decide whether that federal treatment prevents states from enforcing gaming laws against particular contracts or market participants.
What happens next?
The next milestone is the Federal Register publication of the CFTC’s notice, which starts the 30-day comment period. Market operators, state regulators, sportsbook companies, consumer advocates and financial-industry participants will have a formal chance to argue how broadly the swap definition should apply to event contracts.
At the same time, the Ninth Circuit must decide what to do with Kalshi’s rehearing petition and request tied to the CFTC’s rulemaking. The court could deny rehearing, grant rehearing en banc, or hold the petition while the agency process develops.
The practical stakes are immediate. If the CFTC finalizes a broad event-contract rule and courts accept that federal law preempts state gaming enforcement, prediction-market exchanges would gain a stronger path to national sports and political-event products. If states continue to win the preemption fight, federally regulated exchanges may still face a fragmented enforcement map, with sports contracts remaining the most contested category.
For now, the first concrete date is the close of the 30-day comment window after Federal Register publication. The first legal signal will come from the Ninth Circuit’s handling of Kalshi’s rehearing request.
