CFTC Takes New Prediction Market Rules to White House After Kalshi Court Loss
Key Facts
- The CFTC sent two new prediction markets rulemakings to White House regulatory review on September 28: one would include event contracts in the definition of “swap,” while another would exclude casino style gambling products.
- The event contract measure is a proposed rule, while the casino gambling measure is listed as an interim final rule. Neither rule's substantive text is public yet.
- The unresolved issue for the betting industry is where sports contracts fall between those two categories.
- The rulemakings arrive days after the Sixth Circuit held that Kalshi had not shown its sports event contracts qualify as swaps under the Commodity Exchange Act.
CFTC Asks White House to Review New Prediction Market Swap Rules
The Commodity Futures Trading Commission has sent two related rulemakings to the White House Office of Information and Regulatory Affairs, opening a new regulatory front in the federal fight over event contracts.
The first, Further Definition of “Swap” to Include Event Contracts, is listed as a proposed rule. The second, Further Definition of “Swap” to Exclude Casino-Style Gambling Products, is listed as an interim final rule. Both were received by OIRA on September 28 and remain listed on the White House regulatory review docket.
Those titles reveal the basic structure the CFTC is considering, but little else. The regulatory text has not been published, and the OIRA entries do not define either “event contracts” or “casino-style gambling products.”
That leaves the most important question for sports bettors unanswered: whether sports contracts will be affirmatively classified as swaps, placed within the casino exclusion, or divided according to the structure of the underlying product.
One Rule Would Bring Event Contracts Into the Swap Definition
The “include event contracts” rule goes directly to the statutory issue that has driven much of the litigation between prediction market exchanges and state gaming regulators.
The Commodity Exchange Act defines swaps broadly enough to include certain contracts whose payment depends on an event associated with financial, economic or commercial consequences. The CFTC has repeatedly argued that event contracts traded on regulated exchanges can fall within that definition, including contracts based on sports.
In an amicus brief filed in Kalshi’s Ohio litigation, the CFTC told the Sixth Circuit that “event contracts - including sports event contracts - straightforwardly qualify as ‘swaps.’”
A formal regulation expressly including event contracts would turn that litigation position into an agency rule rather than leaving it primarily in briefs and individual product filings. How much additional legal weight that carries will depend heavily on the language the CFTC ultimately publishes and the statutory authority it invokes.
The Casino Style Exclusion Could Decide Where Sports Land
The second rule may prove just as important. The CFTC is proposing to further define swaps while simultaneously preparing an interim final rule that would exclude “casino-style gambling products” from that definition.
That concept is separate from the event contract framework the CFTC proposed in June under its existing rules. That proposal defined “gaming” broadly enough to include sports games and athletic competitions, while still leaving room for the Commission to evaluate individual gaming related contracts rather than automatically treating every sports contract the same way.
The June proposal also indicated that conventional sports outcomes - including final scores, point differentials, win-loss results and tournament advancement - could weigh against finding a contract contrary to the public interest. Games determined primarily by random chance received considerably less favorable treatment.
The new rulemaking appears to address a different question: whether some gambling products should sit outside the statutory definition of a swap altogether. Until the text is published, it would be premature to assume how the CFTC intends to reconcile that exclusion with its June treatment of sports event contracts.
The Rules Arrive After a Major Sixth Circuit Rejection
The timing is difficult to separate from the CFTC's courtroom problems.
On September 25, the Sixth Circuit issued a published decision covering Kalshi's cases in Ohio and Tennessee. The court held that Kalshi had not shown its sports event contracts satisfy the Commodity Exchange Act's statutory definition of a swap and therefore had not established that those contracts fall within the CFTC's exclusive jurisdiction.
The court went further, holding in the alternative that even if the sports contracts were swaps, the Commodity Exchange Act did not expressly or impliedly preempt the states' gambling laws. In the panel's words, Kalshi's sports contracts “do not constitute swaps as defined in the CEA.”
That puts the agency's regulatory position and a federal appellate court's interpretation of the statute in direct tension. A new CFTC rule can materially change the arguments available in future cases, but it would not simply erase the Sixth Circuit's statutory holding.
Why This Matters For Bettors
Kalshi and other federally regulated prediction market exchanges have spent much of the past two years arguing that their sports contracts are derivatives regulated by the CFTC, not sports bets that require a state gambling license. That argument is a big reason someone in a state without legal online sportsbooks can trade an NFL or college football market on a prediction market.
Courts are increasingly pushing back on that theory. If the CFTC now writes a rule explicitly saying qualifying sports event contracts are swaps, exchanges get a much clearer federal rule to point to when state regulators tell them to shut down. That would not guarantee the exchanges win those fights, especially after the Sixth Circuit's ruling, but it gives their lawyers considerably more to work with than an agency position buried in court briefs.
For a bettor, the practical stakes are market access. These legal fights can determine whether a sports market remains available in your state or gets geofenced overnight.
There is another side to the rulemaking. The phrase “casino-style gambling products” could become the line the CFTC uses to keep traditional gambling dressed up as a financial contract out of its markets. If sports contracts fall on that side of the line - either entirely or depending on how they are structured - prediction market operators could have much less room to offer products that look and function like conventional sportsbook bets.
That makes the actual definitions more important than the rule titles. A market on whether the Chiefs win the Super Bowl, a same-game player proposition and a contract tied to an economically meaningful event might all involve different legal arguments once the CFTC shows exactly where it intends to draw the boundary.
What Happens Next
OIRA must complete its review before the rules move toward publication. The proposed event contract rule would ordinarily proceed through notice and comment, giving exchanges, state regulators, gaming interests and other stakeholders an opportunity to challenge or support the CFTC's definitions.
The casino style measure could move differently because it is designated an interim final rule. That format can allow an agency to issue a rule without the normal proposed rule stage and seek comments afterward, although the CFTC's actual effective date and legal justification will not be known until the text is released.
The language to watch is now straightforward: how the CFTC defines an event contract, what qualifies as casino style gambling, and where sports sit between those definitions. Those provisions will determine whether these filings become another layer of prediction market regulation or a direct attempt to reshape the legal argument currently being decided in federal courts.
Marcus has spent over 20 years navigating the legal side of online betting - from his early days consulting for offshore operators to helping licensed U.S. sportsbooks launch in regulated markets. He’s worked with compliance teams, reviewed licensing frameworks in 15+ states, and advised on some of the biggest regulatory shifts since PASPA was repealed.
At BettingScanner, Marcus serves as the voice of reason - translating legalese into plain English and helping bettors understand what’s legal, what’s risky, and where the gray areas live. If you’re ever unsure about the rules, Marcus is your man - as he probably helped write them.
