CFTC Files Two Proposals to Separate Prediction Markets from Casino Gambling

CFTC moves to define prediction market contracts as swaps

The Commodity Futures Trading Commission (CFTC) issued two proposals on Friday, October 9, that attempt to draw a legal line between prediction markets and traditional casino gambling. The first proposal would classify event contracts as "swaps" under federal law. The second would formally exclude casino-style gambling products from that same definition.

Prediction markets let people place bets on real-world events such as sports results, political elections, cultural happenings, and weather outcomes. The CFTC has long argued that these contracts are financial instruments falling under its federal authority, not state gambling laws.

Multiple states have sued prediction market operators including Kalshi and Polymarket, claiming they operate as illegal gambling businesses. The CFTC has filed counter-suits to defend its federal jurisdiction over event contracts.

Key numbers and details

• Two proposals filed by the CFTC on October 9, 2026
• 30-day public comment window for both measures
• Event contracts covered include sports, politics, culture, and weather
• Casino-style gambling — including sportsbook wagers and casino games — excluded from the swap definition

What Chairman Michael Selig said

CFTC Chairman Michael Selig stated that event contracts are "commodity derivatives squarely within the CFTC's regulatory remit under the Commodity Exchange Act and are within the agency's exclusive jurisdiction."

On the gambling exclusion, Selig said: "Casino-style gambling products are not derivatives. 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."

These are direct quotes from the CFTC press releases linked in the reporting.

State lawsuits and conflicting court rulings

The legal landscape for prediction markets is currently divided across federal appellate courts. In late September 2026, the 6th Circuit Court of Appeals ruled unanimously against Kalshi when Ohio and Tennessee challenged the company. The three-judge panel found that Kalshi had failed to demonstrate its sports-event contracts qualify as "swaps" under CFTC jurisdiction.

By contrast, an April 2026 decision by the 3rd Circuit Court of Appeals allowed Kalshi to continue operating in New Jersey while its appeal proceeds. That ruling found Kalshi was likely to succeed in arguing that federal law preempts New Jersey's gambling regulations.

A group of state lawmakers has also filed an amicus brief with the US Supreme Court, asking the justices to weigh in on whether state gaming authorities or federal agencies should have jurisdiction over prediction market companies. The NFL has backed New Jersey authorities in a Supreme Court petition related to Kalshi.

What is confirmed

• The CFTC filed both proposals on October 9, 2026, each with a 30-day comment period.
• Chairman Michael Selig publicly stated the CFTC's position on both the inclusion of event contracts and the exclusion of casino gambling.
• The 6th Circuit ruled against Kalshi on Ohio and Tennessee's challenge; the 3rd Circuit allowed Kalshi to operate in New Jersey during its appeal.
• State lawmakers filed an amicus brief with the Supreme Court on the jurisdiction question.

What remains uncertain

The proposals are not yet final rules. They must go through a public comment period and may be revised before taking effect. No source confirms a timeline for final action.

The split appellate rulings — the 6th Circuit against Kalshi and the 3rd Circuit in its favor — mean there is no single federal standard yet for how prediction markets should be regulated. A Supreme Court decision would be needed to resolve the conflict, but no filing for Supreme Court review has been confirmed in the supplied material beyond the state lawmakers' amicus brief and the NFL's backing of New Jersey's position.

Why this matters for prediction markets

These proposals attempt to create a clear federal framework that distinguishes regulated financial contracts from unregulated gambling. If the CFTC's position prevails, prediction market operators could gain certainty that they operate under federal derivatives rules rather than face patchwork state gambling laws.

However, the conflicting court rulings and active state lawsuits show that the legal foundation is fragile. Until the Supreme Court or final CFTC rules settle the question, operators like Kalshi and Polymarket face ongoing legal risk in the states where they operate.

What happens next

Both proposals are open for public comment for 30 days from their filing. After the comment period, the CFTC may finalize, revise, or abandon the rules. The jurisdictional question between federal and state authorities may ultimately reach the US Supreme Court, though no confirmed Supreme Court case has been filed according to the supplied material.

Sources

• Cointelegraph