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FollowingKey facts
The U.S. Commodity Futures Trading Commission (CFTC) issued an interim final rule on Friday that explicitly excludes casino-style gambling products from the definition of swaps.
On the same day, the CFTC proposed a separate rule to classify event contracts related to sports, politics, culture and weather as swaps, thereby bringing them within the scope of regulation. Both measures have a 30-day public comment window after publication in the Federal Register, with exclusion clauses on gambling products taking effect immediately.
The U.S. Commodity Futures Trading Commission drew a regulatory boundary on Friday: It excluded casino-style gambling from the swap definition, while also proposing to include contracts for events related to sports, politics, culture and weather in the definition.
This distinction is crucial to the fast-growing forecasting market industry, and platforms including Kalshi are affected by it. Contracts classified as swaps by the CFTC are federally regulated and are not subject to state gambling laws; excluded contracts continue to be regulated separately by states.
This interim final rule will take effect immediately upon publication in the Federal Register. It formalized what CFTC Chairman Michael Selig called the agency's long-standing position on casino-like products.
"Casino-style gambling products are not derivatives," Selig said. "Just as the CFTC has historically treated other state-regulated products, the committee today clarified the boundaries of its regulatory authority by formally excluding casino-style gambling products from the definition of 'swaps.'
The accompanying proposal takes the opposite direction with regard to event contracts, explicitly expanding the definition of "swaps" to include contracts related to sports, political, cultural and weather outcomes.
Selig said: "Americans use event contracts to hedge risk, speculate, and provide the public with information about the outcome of future events." "These products are commodity derivatives, squaredly within the CFTC's regulatory remit under the Commodity Exchange Act and are within the agency's exclusive jurisdiction." (Note: The original text here is quoted in English, which means that it is fully within the supervision scope of the CFTC under the Commodity Exchange Act and within the exclusive jurisdiction of that agency.)
The CFTC's move comes amid a lawsuit in the Kalshi Supreme Court.
The rule comes amid a fierce legal battle over the same issue. The NFL recently urged the U.S. Supreme Court to accept New Jersey's challenge to forecasting market operator Kalshi, arguing that sports event contracts are bets that should be regulated by states, rather than swaps under the exclusive jurisdiction of the CFTC.
The Federal Appeals Court was divided on this issue. The Third Circuit Court of Appeals ruled that Kalshi's sports contract was a swap, while the Sixth and Ninth Circuit Courts of Appeals ruled the opposite. Until the Supreme Court makes any decision, the definition proposed by the CFTC will be consistent with the interpretation of the Third Circuit Court of Appeals.
The public must submit comments via Regulations. govwithin 30 days of each of the measures being published in the Federal Register.
