The U.S. Commodity Futures Trading Commission (CFTC) is taking steps to clarify the definition of a “swap” in a bid to gain exclusive federal jurisdiction over event contracts in regulated prediction markets. This move comes amid ongoing conflicts with state gambling regulators.
According to a docket from the Office of Information and Regulatory Affairs, the CFTC has submitted a proposed rule that would expand the definition of “swap” to encompass event contracts. Additionally, an interim final rule is being considered to exclude casino-style gambling products from this definition.
This classification is crucial as the CFTC asserts that federal law grants it exclusive authority over swaps traded on its regulated exchanges, such as those operated by Polymarket and Kalshi. However, state regulators have challenged this stance, particularly concerning sports event contracts, claiming they fall under state gambling laws.
The outcome of this jurisdictional battle could have significant implications for the future of prediction markets and how they are regulated across the United States.