CFTC Seeks To Classify Event Contracts As Swaps

The U.S. Commodity Futures Trading Commission (CFTC) has submitted two related rules on swaps definitions for White House review, seeking to formally include event contracts as 'swaps' and sever them from ties to gambling. This move is part of the CFTC's effort to regulate prediction markets and defend against legal pushback from states.

The CFTC has submitted a rule to propose a new definition of swaps that would include event contracts traded on platforms such as Kalshi, Polymarket, Crypto.com, and Robinhood. Additionally, the CFTC is pursuing an 'interim final rule' that would remove 'casino-style gambling products' from what can make up a swap.

The classification of event contracts as swaps could assist the CFTC's claim that it has exclusive federal jurisdiction over event contracts offered on regulated prediction markets. This is significant, as a recent federal court decision ruled that Kalshi's sports-tied contracts are not swaps and are subject to state gambling regulations.

The CFTC's moves could counter states' claims that sports trades on platforms such as Kalshi's are unregulated gambling. The rules were received by the Office of Management and Budget (OMB) for review, which is generally a final step before submitting rules for public comment.

## What's at Stake The stakes are high, as the CFTC's efforts to regulate prediction markets and event contracts have been met with resistance from states. The CFTC's position could have significant implications for the future of prediction markets and the regulation of event contracts. If successful, the CFTC's moves could provide clarity and certainty for platforms operating in this space, while also potentially limiting the ability of states to regulate these contracts as gambling.

## Why it Matters The CFTC's efforts to regulate event contracts and prediction markets are part of a broader effort to provide oversight and protection for consumers. By defining event contracts as swaps, the CFTC is seeking to ensure that these contracts are subject to federal regulation and oversight, rather than being left to individual states to regulate as gambling. This could provide greater consistency and clarity for platforms operating in this space, while also helping to protect consumers from potential risks and abuses.