CFTC proposes a divide between prediction contracts and sportsbook wagers

CFTC sets regulatory boundaries for prediction contracts and sportsbook wagers

Regulatory Proposal

The CFTC has proposed a regulatory divide between prediction contracts and sportsbook wagers, aiming to clarify federal jurisdiction over the latter. The proposed definition includes event contracts for sports, politics, and cultural events, while excluding sportsbook and casino wagers from the swap category.

Background

The Commodity Futures Trading Commission (CFTC) has announced two actions on Oct. 9 seeking to clarify the federal regulatory boundary between prediction-market contracts and traditional gambling. It proposed expressly including sports and other event contracts in the definition of a swap, a category of financial derivative, while announcing a separate interim final rule to codify the exclusion of sportsbook and casino wagers.

Event Contracts

Event contracts often let traders buy yes-or-no positions on a future outcome, with a fixed payout, usually $1. Their value depends on that outcome, and they can be used to hedge risk or speculate. The distinction is visible in how platforms present their products: CryptoSlate’s Cloudbet sportsbook review examines odds-based wagers, while its Polymarket review examines tradeable outcome contracts.

Regulatory Implications

The proposed inclusion is not final. The CFTC is seeking written comments through Regulations.gov within 30 days of the proposal’s publication in the Federal Register. The casino-wager action is an interim final rule. The agency describes it as codifying its longstanding position that casino-style gambling products, including wagers placed on sportsbooks and casino games, fall outside the swap definition.

State-Law Disputes

The agency’s classification position faces a separate legal question: whether federal regulation displaces state gambling laws. In a Sept. 25 ruling on preliminary-injunction appeals involving prediction-market operator Kalshi, the Sixth Circuit held that the company had not shown its sports-event contracts met the statutory swap definition. It also held, alternatively, that even assuming the contracts were swaps, the Commodity Exchange Act did not expressly or impliedly preempt Ohio’s or Tennessee’s gambling laws.