- A bet accepted under a state or tribal gambling license is not a swap, the interim final rule says, whether at a sportsbook or a casino.
- A separate proposal would name event contracts, from sports to elections and weather, as swaps in the same definition.
- The proposal puts average monthly event-contract volume in August at about $1.5 billion, roughly $1.2 billion of it on sports.
- Kalshi cited both rules Oct. 9 when it asked every judge of the Sixth Circuit to revisit the Sept. 25 ruling for Ohio and Tennessee.
WASHINGTON – A wager placed with a state- or tribally licensed sportsbook or casino is not a swap, the Commodity Futures Trading Commission (CFTC) said Oct. 9 in an interim final rule. A second document issued that day goes the other way for prediction markets: it proposes treating event contracts on games, elections, culture and weather as swaps.
Licensed Wagers Are Carved Out Of The Swap Definition
The interim final rule (RIN 3038-AF81) adds a paragraph to the definition of “swap” in 17 CFR 1.3. It covers a wager that a state-licensed operator, or a tribal operator authorized under the Indian Gaming Regulatory Act, accepts while acting within its license. State or tribal law has to regulate that wager as gambling, and it cannot be traded on an exchange or on any venue where many buyers and sellers execute against one another or negotiate terms one on one.
The regulatory text spells out three product categories, namely sports wagers, casino games, and other licensed games of chance, which the text illustrates with “bingo, pool wagering, lotteries, and raffles.”
Chairman Michael Selig said in the agency’s release that “Casino-style gambling products are not derivatives.” Once effective, the exclusion leaves wagers at licensed gambling sites for USA players with state and tribal regulators alone.
The agency’s cost analysis says it changes no one’s legal rights or obligations, because the commission has never claimed jurisdiction over those products. A footnote adds that the carve-out is not exhaustive, offering a wager between two friends and an unlicensed sportsbook in a state that bans gambling as other examples of products that are not swaps.
Exchange Trading Is The Dividing Line
A second test in the rule turns on where a contract trades. A wager the operator accepts as principal under house rules passes. A contract entered on a CFTC-registered exchange fails, the rule says, because competing buyers and sellers set its price.
The rule lists five differences between event contracts and gambling products. Event contracts trade at market-set prices on a central order book, and the neutral exchange earns fees rather than profiting when a contract settles one way. They are centrally cleared and have a history of federal regulation, and the agency preliminarily believes the trade recognizes them as swaps.
Congress also addressed event contracts that involve gaming in a special rule enacted alongside the swap definition.
A footnote adds a practical difference. A sportsbook may exclude winning customers, while an exchange must give impartial access under 17 CFR 38.151 and cannot bar traders who have profited.
The Proposal Writes Event Contracts Into The Definition
The companion proposal (RIN 3038-AF82) would add a line to the swap definition naming event contracts, the product behind prediction markets, and listing contracts on sporting events, elections, cultural events and weather among them. Selig said in the release that the products are “commodity derivatives squarely within the CFTC’s regulatory remit” and its exclusive jurisdiction. The proposal is separate from the agency’s June 12 proposed CFTC gaming rule, which would set the standard for which sports contracts exchanges may list.
By the proposal’s count, seven or more CFTC-registered exchanges sold sports contracts to U.S. customers on Sept. 1, and more than 15 exchange applications have been filed since 2025. August event-contract volume averaged about $1.5 billion a month on exchanges reporting to the agency, its cost analysis says. Sports contracts made up roughly $1.2 billion of that, politics $11 million and weather $4 million. Sports account for about 80% of that volume, so the classification fight centers on sports betting more than on elections.
The same analysis lists costs. States might receive less fee and other revenue if companies structure as federal exchanges instead of operating under state rules, the added certainty could read to retail traders as a safety signal, and event-contract trading has traits associated with addictive potential.
The Agency Ties Spreads And Single Games To Economic Consequences
The proposal answers the Sixth Circuit’s holding that a swap needs an event inherently associated with a financial, economic or commercial consequence. It cites the New York Knicks’ 2026 championship run, which it says generated around $380 million for New York City’s economy, and says Madison Square Garden Sports doubled in market value over a year.
It argues single regular-season games count too, and that a game’s spread carries economic consequences because close games draw larger television audiences than blowouts. For an event with no such consequence that fits no other part of the definition, the proposal says the commission keeps authority to stay a contract’s listing.
The Rules Respond To The Sixth And Ninth Circuits
The interim rule labels as an “erroneous premise” the belief that if event contracts are swaps, casino-style gambling must be too, and says that premise has led courts and states away from the statute’s text. Two appellate losses for Kalshi drive the point. The Sixth Circuit decided KalshiEX v. Schuler on Sept. 25 and the Ninth Circuit decided KalshiEX v. Assad on Aug. 28, and each court worried that every sportsbook bet would become a swap.
The rule says it implements a route the Third Circuit mapped in April, when a 2-1 panel ruled for Kalshi against New Jersey. It also quotes Kalshi’s May 5 brief to the Sixth Circuit, which said that treating its contracts as swaps does not make run-of-the-mill sports bets swaps.
To skip notice and comment, the rule cites “good cause.” It also cites a brief that Ohio, 38 other states and the District of Columbia filed Oct. 7 in New Jersey’s Supreme Court case, which calls federal and state courts “hopelessly confused and divided.” The states urged the justices to review the Third Circuit ruling that treated Kalshi’s contracts as swaps. The proposal says such contracts are swaps, so the pair meets the states’ concern about sportsbook bets and runs against their position on contracts.
Kalshi Cites The Rules In Its Rehearing Petition
On Oct. 9, Kalshi asked the Sixth Circuit’s full active bench to take a second look at KalshiEX v. Schuler and KalshiEX v. Orgel, Bloomberg Law reported. The petition argues the new rules undermine the panel’s reading of the word “swap,” Law360 reported Oct. 13.
The three-judge panel ruled that Kalshi had not proved its sports contracts to be swaps, then added a second, independent holding that the Commodity Exchange Act leaves Ohio’s and Tennessee’s gambling laws intact even if they were. Neither CFTC document addresses that second holding. The proposal also notes that a petition for rehearing en banc was filed Sept. 9 in the Ninth Circuit case.
Federal Register Publication Starts The Clocks
The interim rule is in force the day the Federal Register prints it, and each document carries its own 30-day comment window that opens on its publication date. The interim rule asks three questions of commenters: whether providers other than state-regulated operators and tribes belong inside the carve-out, whether the products a state or tribe regulates as gambling can be identified with certainty, and whether a sharper functional line can be drawn between swaps and gambling.
In the Supreme Court, Kalshi’s response to New Jersey’s petition in No. 26-299 is due Nov. 9, according to the docket.