The CFTC is trying to formalize the line prediction markets depend on: event contracts can be federally regulated swaps, while casino-style gambling products are not. That distinction determines whether platforms can operate through one federal regulator or must answer to state gambling authorities and tribal gaming law.
Bloomberg’s Lydia Beyoud reports that the agency sent two rules to the White House Office of Management and Budget. An interim final rule would exclude casino-style products from the definition of a swap and could take effect when published in the Federal Register. A separate proposed rule would explicitly include event contracts—the instruments sold by Kalshi, Polymarket, Rothera and Novig—in that definition.
The categories are harder to separate in practice. Swaps have traditionally served institutional investors and commodity producers as tools for hedging or speculation. Prediction exchanges now use the same legal framework to sell retail contracts on sports, celebrity births and other events. They do not offer blackjack or pure-chance casino games, but sports contracts can be nearly indistinguishable from bets available at licensed sportsbooks.
That classification also allocates the costs and protections around the product. State gambling systems impose their own licensing, tax, age and consumer-protection rules. A federally regulated exchange can argue that those rules are preempted, allowing the same contract to reach customers nationally without entering each state’s gambling system.
The rules arrive amid lawsuits involving the CFTC, state regulators and Indian tribes. Appellate courts have split over whether sports event contracts qualify as swaps, and New Jersey has asked the Supreme Court to take the issue. OMB can still revise the measures, the CFTC must vote to release them, and Bloomberg notes that their effect on the litigation is not yet clear. For now, the proposal shows how much of prediction markets’ expansion rests on a regulatory label: the product may function like sports betting for the customer while being governed as a financial derivative for the operator.