On September 28, 2026, the Commodity Futures Trading Commission (the CFTC or Commission) submitted two proposed rules to the White House Office of Information and Regulatory Affairs (OIRA) that would further define the term “swap” under the Commodity Exchange Act to resolve the question of whether event contracts traded on prediction market platforms fall within the CFTC’s exclusive jurisdiction.
On October 9, 2026, following OIRA review, the CFTC published both rules. The first, an Interim Final Rule (IFR) excluding casino-style gambling products from the swap definition, took effect immediately upon publication. The second, a Notice of Proposed Rulemaking (NPRM) that would further define “swap” to include event contracts, was published for public comment. The filings are the latest step in the CFTC’s broader strategy of using its existing statutory authority to settle regulatory questions that Congress has so far left unresolved, and they arrive as state regulators, federal courts, and now potentially the Supreme Court continue to contest who has the final say over prediction markets.
Background: The Jurisdictional Fight Over Sports-Event Contracts
Prediction market platforms allow users to trade yes-or-no contracts on the outcome of future events, including elections, economic data releases, and other binary occurrences. The CFTC has asserted that these event contracts qualify as “swaps” under the Commodity Exchange Act, placing them within the Commission’s exclusive jurisdiction and beyond the reach of state gambling regulators. State regulators have challenged that position, particularly with respect to sports-related contracts, arguing that those products constitute gambling subject to state licensing and consumer-protection laws. The CFTC, in turn, has filed federal lawsuits challenging certain state enforcement actions and has submitted amicus briefs supporting its position that federal law preempts state regulation of CFTC-regulated event-contract markets.
The resulting split has played out unevenly in the federal courts. A series of conflicting appellate decisions has reached different conclusions as to whether event contracts qualify as swaps, a split significant enough that it is now drawing the attention of the Supreme Court. Chairman Michael Selig has argued publicly that the CFTC’s jurisdiction over these products is exclusive, and the Commission’s new rulemaking package appears designed to lock in that position in the Commission’s own regulations rather than wait for the courts, or Congress, to resolve the question.
The Two Rules Published Following OIRA Review
The CFTC submitted two separate rules to OIRA on September 28, 2026, and announced both on October 9, 2026, following interagency review, with formal publication in the Federal Register following on October 19, 2026. The first, a Notice of Proposed Rulemaking, proposes to further define the term “swap” to expressly include event contracts, including those based on sports, politics, cultural, and weather-related events, by adding new paragraph (2)(i)(G) to the “swap” definition in 17 CFR 1.3. Chairman Michael S. Selig stated that “[a]mericans use event contracts to hedge risks, speculate, and provide the public with information about the outcome of future events” and that “[t]hese products are commodity derivatives squarely within the CFTC’s regulatory remit under the Commodity Exchange Act and are within the agency’s exclusive jurisdiction.” Because it is a proposed rule rather than an interim final rule, it proceeds through notice-and-comment rulemaking; written comments must be submitted via Regulations.gov and received by November 18, 2026.
The second, an Interim Final Rule, codifies the CFTC’s longstanding position that casino-style gambling products, including wagers placed on sportsbooks and casino games, are excluded from the definition of a swap. The IFR adds new paragraph (7) to the “swap” definition in 17 CFR 1.3, excluding an agreement, contract, or transaction that satisfies both a “Provider Test” (it is offered by a person licensed or otherwise authorized to offer gambling or gaming products under State law or under a federally recognized Indian Tribe’s law pursuant to the Indian Gaming Regulatory Act, and is regulated as gaming or gambling under applicable State or Tribal law) and a “Product Test” (it is not traded on a board of trade, an organized exchange, a swap execution facility, or any other market where trades are executed multilaterally or subject to individual negotiation). The rule expressly identifies three illustrative categories of excluded products: sports wagers accepted by a licensed sportsbook or sports-wagering operator, casino games such as table games, slot machines, or other electronic gaming devices, and other licensed games of chance such as bingo, pool wagering, lotteries, and raffles. Chairman Selig stated that “[c]asino-style gambling products are not derivatives” and that, “[j]ust as the CFTC has done with respect to other products historically regulated by the states, the Commission today provides clarity regarding the limits of its regulatory remit by codifying the exclusion of casino-style gambling products from the ‘swap’ definition.” Unlike the companion NPRM, the IFR took effect immediately upon its October 19, 2026, publication in the Federal Register, without a prior public comment period, though the CFTC will still accept written comments via Regulations.gov through November 18, 2026. The two rules are designed to work as a pair. The NPRM would pull event contracts into the swap definition and therefore within the CFTC’s jurisdiction, while the IFR carves out traditional gambling products to make clear that the agency is not asserting jurisdiction over wagering generally.
The CFTC has classified both rules as not economically significant. With both rules now published, market participants can review the full text of each to assess how the agency intends to distinguish an event contract from a casino-style gambling product, and what the practical significance of that classification will be for their businesses.
On September 22, 2026, the CFTC’s Division of Market Oversight issued an advisory addressing “mention markets,” taking the position that prediction market contracts that settle based on whether a named individual says particular words should be presumed readily susceptible to manipulation. Separately, the CFTC is also investigating former Representative Adam Kinzinger for similar issues, underscoring the agency’s active enforcement posture even as it pursues new rulemaking.
At the state level, New York has sued to ban Polymarket from operating within the state, alleging that the platform operates an illegal gambling business. These state enforcement actions are likely to continue regardless of the CFTC’s rulemaking, at least until a final rule is in place or the Supreme Court resolves the underlying jurisdictional question.
What This Means for Market Participants
The CFTC’s rulemaking package has now moved from OIRA review to publication. The Interim Final Rule excluding casino-style gambling products from the swap definition is effective immediately, though the CFTC will still accept written comments for 30 days following its publication in the Federal Register. The Notice of Proposed Rulemaking that would further define “swap” to include event contracts remains subject to a 30-day public comment period and possible revision before any final rule takes effect. Market participants should review the full text of both rules now that they are public.
That said, the direction of travel is clear. Having been unable to secure a definitive answer from Congress or the courts, the CFTC is attempting to resolve by regulation a question that has otherwise been litigated case by case. Platforms operating prediction markets, as well as banks, broker-dealers, and other financial institutions considering participation in this space, should review the published IFR and NPRM closely, consider submitting comments on the NPRM before the 30-day comment window closes, and evaluate how a definitive swap classification would affect their registration status, compliance obligations, and exposure to continuing state enforcement efforts.
Contact Us
For further discussion about how these developments may affect your business, please contact Jeff Le Riche, Kip Randall, Gavi Kalaga, or Alex Keledjian.