CFTC Issues Interim Rule and Proposal to Lock In Federal Jurisdiction Over Event Contracts
The U.S. Commodity Futures Trading Commission took a decisive step on Friday to cement its claim of exclusive regulatory authority over prediction markets. By adopting a new definition and proposing additional rule changes, the agency is working to classify event contracts as "swaps" — a category of transactions that falls squarely under CFTC jurisdiction and, by extension, outside the reach of state gambling regulators.
The move is designed to draw a clear legal line: casino-style wagering will be explicitly excluded from the swaps definition, while event contracts — including those tied to sports outcomes, political events, cultural happenings, and weather patterns — will be formally incorporated into the existing federal framework governing swaps. The CFTC is proposing this inclusion for products routinely traded on platforms such as Kalshi and Polymarket.
The agency issued the carve-out for casino gambling as an interim final rule, meaning it takes immediate effect as policy but remains open to public comment during implementation. The broader proposal to fold event contracts into swaps regulation is still in the proposal stage, with a relatively short 30-day window for public input.
Legal Battle with States Intensifies as Supreme Court Weighs In
The regulatory push arrives amid a heated dispute with multiple states and former federal officials who helped craft the underlying legislation. Several state governments have argued that the CFTC's interpretation of the swaps definition would effectively render any wager placed at a state-licensed or tribal casino and sportsbook federally illegal. Those objections were formally submitted to the U.S. Supreme Court earlier this week, where the justices have been asked to resolve the jurisdictional conflict.
If the CFTC is ultimately called to present its case before the high court, the agency will now be able to point to concrete regulatory action demonstrating that it has already moved to implement the interpretation championed by Chairman Mike Selig.
In the lower courts, the picture has been mixed. Over recent months, federal appellate decisions have cut in both directions: one ruling sided against the states, while two separate appellate decisions upheld state authority over the sports-betting activity conducted on prediction market platforms. Several states are simultaneously litigating directly against the CFTC, accusing platforms like Kalshi of operating illegal gambling operations within their borders.
Analysts Question Whether the New Rules Will Hold Up in Court
Jaret Seiberg, a policy analyst at TD Cowen, characterized the interim final rule in a Friday client note as a strategic maneuver to strengthen the CFTC's litigation position. He wrote that the agency appears to be pre-empting the states' argument that its definition of a swap would make any bet placed at a state or tribal casino or sportsbook federally prohibited. Seiberg added, however, that whether the legal strategy ultimately succeeds remains an open question.
The speed of the process was notable. The agency's actions had been forwarded for White House review less than two weeks before publication, suggesting an unusually accelerated internal timeline. Still, the CFTC had strong incentives to respond to legal critics who have challenged its assertion that prediction markets fall exclusively within its domain. Clarifying that traditional casino-style gambling is not within the agency's purview is a key component of that defensive posture.
Thin Commission and Industry Alignment Shape the Path Ahead
Prediction market operators such as Kalshi have aligned themselves with the CFTC's position, seeking to establish the federal agency as their sole regulatory overseer. This creates a direct contrast with state gambling authorities, who contend they retain enforcement power over the same activities.
The CFTC's capacity to act swiftly is partly a function of its current staffing. Selig serves as the sole commissioner on a body designed to have five members. President Donald Trump has so far declined to appoint additional CFTC members, meaning Selig can unilaterally advance the agency's policy agenda. A similar situation is unfolding at the Securities and Exchange Commission, where the five-member panel has been reduced to just two sitting commissioners. The administration has made a deliberate effort to remove or limit the number of Democratic appointees across regulatory agencies, a trend that has left several federal bodies operating with diminished quorum and, in some cases, a single decision-maker.
The interplay between the CFTC's new regulatory framework, ongoing state-level litigation, and the potential Supreme Court ruling will ultimately determine whether event contracts settle into a single federal regulatory regime or continue to exist in a contested legal gray zone.