CFTC Proposes Classifying Prediction Contracts as Swaps

The Commodity Futures Trading Commission proposed classifying sports, political, cultural and weather event contracts as swaps Friday, reinforcing its claim to exclusive federal oversight of prediction markets.

The proposal describes event contracts as financial instruments that can be used to hedge risks, speculate and provide information about future events. The agency’s position would place qualifying contracts within the Commodity Exchange Act’s derivatives framework, including markets that may be linked to crypto platforms.

The CFTC also issued an interim final rule stating that casino-style gambling products, including sportsbook and casino wagers, are excluded from the swap definition. That rule takes effect when published in the Federal Register.

The federal position conflicts with a Sept. 25 ruling by the Sixth U.S. Circuit Court of Appeals. The court held that Kalshi had not shown its sports-event contracts met the statutory definition of a swap. It also ruled that federal law did not preempt gambling laws in Ohio or Tennessee, even if the contracts qualified as swaps.

The proposed classification may sharpen the federal boundary between prediction contracts and ordinary wagers without resolving whether states can restrict sports-related markets. Written comments on both actions are due within 30 days after their Federal Register publication.