Securities Regulation Daily Wrap Up, EXCHANGES AND MARKET REGULATION—CFTC: sportsbook wagers are not ‘swaps‘ but sports-related event contracts are, (Oct 13, 2026)
The pair of rulemakings address the ongoing debate regarding the jurisdiction of the CFTC versus states over event contracts and prediction markets.
The CFTC undertook two rulemakings to clarify what types of prediction market products are “swaps” under the Commodity Exchange Act (CEA) and which are not. In a new interim final rule, the CFTC excluded some transactions traditionally viewed as gambling from the definition of “swap” under the CEA, including casino games and wagers placed on sportsbooks. But the CFTC proposed new rules to include certain event contracts within the “swap” definition that some states have argued are also gambling, including those based on sports, politics, cultural, and weather-related events.
“Casino-style gambling products are not derivatives,” said Chairman Michael Selig. “Just 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.”
Rather than examining the economic reality of transactions, the “exclusions” interim final rule bases jurisdiction on what authority supervises the transaction provider and whether the transaction is offered on an organized exchange.
The interim final rule will take immediate effect upon publication in the Federal Register. Comments can be submitted for 30 days following publication.
Of the products proposed not to be swaps, Selig added, “Americans use event contracts to hedge risks, speculate, and provide the public with information about the outcome of future events. These products are commodity derivatives squarely within the CFTC’s regulatory remit under the Commodity Exchange Act and are within the agency’s exclusive jurisdiction.”
Comments for the “inclusions” proposed rules will be open for 30 days following publication in the Federal Register.
Not swaps. Citing widespread litigation over federal preemption of state gambling laws, the CFTC said there is “widespread confusion” regarding whether the definition of a swap includes casino-style gambling products, including wagers placed on sportsbooks and casino games, which are traditionally regulated at the state level. This has led to a “misunderstanding” amid concerns that the CFTC may take over oversight of casino gambling from the states.
“[M]any courts, states, and private businesses are currently operating under the erroneous premise that if event contracts are swaps, then casino-style gambling products must also be swaps subject to CFTC jurisdiction,” the CFTC stated.
The CFTC said some states have “exploited” this uncertainty to assert that event contracts traded or executed on a CFTC-designated contract market (DCM) should be state regulated (rather than federally regulated under the CEA).
The CFTC explained that casino-style gambling products are not within its jurisdiction due to several differences from event contracts traded on derivatives exchanges.
Gambling products are not inherently “tradable” like CEA-regulated derivatives due to structural characteristics. Casino gambling is typically conducted as bilateral transactions between a casino or bookkeeper (a “house”) and its customer rather than on an organized market. Prices are not set by market forces and are not subject to negotiation; rather, customers must accept the price set by the house.
Unlike CEA derivatives, gambling products are not “cleared,” in that the wager obligation is not routinely transferred to a third party to eliminate counterparty credit risk and ensure contract fulfillment.
There is no indication that Congress intended to include gambling products in the swap definition.
Casino-style gambling products have historically been, and are, offered by state-licensed gambling venues or tribes, and subject to a gambling-specific regulatory regime.
The CFTC is unaware of any trade usage or market belief that gambling products are considered swaps in the derivatives industry.
The CFTC offered two tests for determining the casino gambling carveout. The “Provider Test” looks at whether the transaction provider is subject to the supervision of a state or tribal gaming authority and regulated as gaming under state and tribal law. The “Product Test” examines whether the transaction is offered on an organized exchange.
The CFTC compared gambling to insurance contracts and consumer and commercial agreements, which are also not defined as “swaps.” Insurance and credit default swaps can provide similar risk mitigation, but that does not mean they are or must be regulated the same way. Similarly, regulatory treatment varies depending on whether exposure to a crypto asset is gained by purchasing the crypto asset itself, purchasing shares in a firm that holds the crypto asset, or by purchasing crypto asset futures.
The CFTC also pointed to the Third Circuit’s opinion in KalshiEx v. Flaherty for support.
Swaps. Turning from the casino exclusion to what is included within the definition of “swap,” the CFTC proposed to further define the term “swap” to explicitly include event contracts, including those based on sports-, politics-, cultural-, and weather-related events.
Here, the CFTC said the definition of “swap” is broad and the agency has a long history of regulating event contracts. The CFTC explained that market participants have “overwhelmingly recognized” that event contracts are swaps by complying with the CFTC swap regulatory regime rather than registering at the state level.
For example, over the past several years, DCMs have self-certified thousands of event contracts based on sports, politics, cultural events, and weather to the CFTC.
The CFTC noted that it retains authority under the CEA’s “Special Rule” for event contracts to prohibit event contracts involving “gaming” that are contrary to the public interest, and that the CFTC has proposed to consider whether a contract has utility for price discovery, hedging, and economic decisions in making public-interest determinations.
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