CFTC carves sportsbook bets out of swap definition via interim rule
The CFTC says state- and tribal-licensed sports wagers are not swaps, an interim rule meant to blunt appellate rulings that had blurred the line with prediction market event contracts.
The Commodity Futures Trading Commission has issued an interim final rule stating that bets placed at state- or tribal-licensed sportsbooks and casinos do not count as swaps under the Commodity Exchange Act and therefore fall outside its jurisdiction.
CFTC Chairman Michael Selig said in a release cited by SBC Americas that "Casino-style gambling products are not derivatives," adding that the commission was "codifying the exclusion of casino-style gambling products from the 'swap' definition" in the same way it has previously clarified limits on its authority over other state-regulated products.
The rule takes effect immediately upon publication in the Federal Register, with a 30-day window for public comment.
Alongside it, the CFTC opened a separate comment period on proposed rulemaking that would explicitly define swaps to capture event contracts tied to sports, politics, culture and weather. Selig argued in that notice that such event contracts "are commodity derivatives squarely within the CFTC's regulatory remit" and sit under the agency's exclusive jurisdiction.
The timing is pointed. Both moves land while the U.S. Supreme Court considers New Jersey's petition in Flaherty v. KalshiEX, a case that over the past week has pulled in supporting briefs from gaming regulators, dozens of states and the District of Columbia, plus the National Football League, according to SBC Americas.
Responding to the circuit split
The interim rule reads as a direct answer to rulings from the Sixth and Ninth Circuits, both of which sided with states against Kalshi partly because the courts found no meaningful legal distinction between a sports event contract and a conventional sportsbook wager. Under that logic, if one qualifies as a swap, so must the other, pulling every sports bet into federal oversight.
The CFTC called that reasoning "erroneous," arguing the courts imported restrictions into the statutory definition of a swap that Congress never wrote in.
Instead, the agency pointed to the Third Circuit's April decision favouring Kalshi in the New Jersey case, which held that if unusual edge cases such as bingo or ping-pong contracts emerged, regulators retained the statutory power to further define swaps. The CFTC said its new rule carries out that suggested approach.
Five distinctions, one jurisdictional line
To separate the two products, the CFTC laid out five features distinguishing event contracts from sportsbook bets: pricing through a central order book set by market activity rather than odds set by the operator; clearing through a clearinghouse; Congress's own treatment of gaming-related event contracts under the Act's special rule; decades of exchange-listed event contracts operating under federal oversight since the 1990s; and the derivatives industry's established practice of classifying these instruments as swaps.
The agency conceded that a bettor could obtain similar economic exposure through either product, but said that overlap does not make them legally identical, likening the comparison to the relationship between insurance and credit default swaps.
It also maintained the rule changes no underlying legal rights, since the CFTC has never claimed jurisdiction over state-licensed sportsbooks. The stated purpose, the agency said, is simply to cut down on what it termed interpretive uncertainty as litigation over prediction markets continues to work through the courts.