CFTC proposes new swap rules to regulate prediction markets

The Commodity Futures Trading Commission (CFTC) has proposed new rules to formally include event contracts tied to sports, politics, and weather within its legal definition of swaps. This move aims to establish exclusive federal jurisdiction over prediction markets, which are currently the subject of legal disputes with several states that classify such platforms as gambling.

The regulatory package includes an Interim Final Rule and a Notice of Proposed Rulemaking. The interim rule clarifies that traditional casino-style gambling and sports wagers are excluded from the swap definition. However, the proposed rule seeks to bring event contracts traded on CFTC-registered designated contract markets (DCMs) under federal oversight.

The shift has significant implications for the industry. While retail users may find the experience similar to sports betting, the distinction determines whether operators are subject to state gaming taxes or federal financial regulations. Some companies, such as Sporttrade, have already begun transitioning from state-regulated betting to pursuing federal registration as exchanges and clearinghouses. CFTC Chairman Michael S. Selig maintains that these contracts fall within the commission’s regulatory remit to ensure a unified national framework for market integrity.