CFTC Draws New Regulatory Line Between Sports Betting and Prediction Markets

In its official 9 October announcement, the CFTC confirmed that conventional casino-style gambling products fall outside its derivatives jurisdiction.

The interim final rule formalises the regulator’s longstanding position that sportsbook wagers and casino games should not be classified as swaps.

CFTC Chairman Michael S. Selig said:

Casino-style gambling products are not derivatives.

The rule becomes effective immediately upon publication in the Federal Register. Interested parties will then have 30 days to submit written comments.

The development follows the agency’s earlier decision to send two event-contract measures to the White House for review in late September.

Unlike that preliminary step, the latest announcement includes explicit regulatory language that distinguishes conventional gambling from certain financial contracts.

Alongside the exclusion, the CFTC published a Notice of Proposed Rulemaking seeking to expressly include event contracts in the swap definition separate Notice of Proposed Rulemaking. The proposal covers contracts based on sporting outcomes, political developments, cultural events and weather-related occurrences.

Unlike the interim final rule, this measure has not been finalised. Public comments will be accepted for 30 days following Federal Register publication. The proposed classification could strengthen the regulatory framework platforms such as Kalshi rely on, although it does not automatically settle disputes over state gambling laws.

The proposals arrive amid conflicting judicial decisions concerning federal authority over sports-related prediction markets.

On 6 October, an Illinois federal court granted Kalshi and Coinbase partial protection from state restrictions. The decision, in the Illinois prediction market ruling, found that many disputed contracts likely qualified as swaps. However, enforcement uncertainty continues elsewhere.

In Michigan, Coinbase agreed to halt sports event contracts following regulatory pressure, demonstrating the practical consequences of unresolved jurisdictional disputes. The CFTC’s proposals do not immediately overturn these decisions or establish nationwide immunity from state gambling enforcement.

For prediction market businesses, the distinction between gambling products and event contracts could influence market access, compliance strategies and product development. Operators and B2B providers will need to assess how their products are structured and whether federal derivatives regulation or state gambling requirements apply.

The immediate priority is Federal Register publication and the subsequent consultation periods. Until the proposed event contract classification is finalised and outstanding legal disputes are resolved, regulatory uncertainty will remain a significant consideration for companies operating across multiple US jurisdictions.