The U.S. Commodity Futures Trading Commission has sent two regulatory proposals tied to prediction-market event contracts to the White House Office of Management and Budget, aiming to formally classify those contracts as swaps and separate them from gambling.
The position cuts against arguments from U.S. states that sports-related trades on platforms such as Kalshi amount to unregulated gambling. It also arrives in tension with some recent federal court rulings.
Two rules sent to the White House
The derivatives regulator submitted two related rules for OMB review. One would attach event contracts to the regulatory definition of swaps. The other would state that the products are not connected to gambling. The filings come as the agency continues its legal fight with states over how these contracts should be treated.
The CFTC has embraced the role of federal regulator for prediction markets and the event contracts traded on them. Those contracts are generally binary yes-or-no wagers on measurable outcomes, including sporting events and elections. From that position, the agency has been working to regulate prediction-market venues such as Kalshi while pushing back against states that argue they have authority to oversee some of the contracts as gambling products.
Move clashes with parts of the court record
The most recent federal court ruling explicitly said Kalshi’s sports-linked contracts are not swaps and fall under state gambling regulation. An earlier federal ruling had reached a different conclusion.
The CFTC’s latest effort would push in the opposite direction by drawing a clearer line around what counts as a swap. Swaps are financial instruments regulated by the agency in which two parties agree to an exchange. The CFTC is seeking a new rule that would expand that definition to include event contracts traded on platforms including Kalshi, Polymarket, Crypto.com and Robinhood.
At the same time, the agency is pursuing an interim final rule that would remove 「casino-style gambling products」 from what can make up a swap.
OMB review is a late-stage step before public comment
Both rules were received by OMB this week. That review is generally one of the final steps before a proposal is released for public comment.
For an interim final rule, the effect is different. It can take effect immediately while remaining open to input and later revision.
If event contracts are treated as swaps, and if those swaps are not considered gambling products, that could weaken the states’ position in a broad set of lawsuits against prediction-market companies. Kalshi has repeatedly been at the center of those cases, with states accusing it of operating illegal gambling platforms within their borders.
CFTC has been actively involved in the state fights
The agency has taken an active role in the litigation and has regularly sued states while defending what Chairman Mike Selig has argued is the CFTC’s sole jurisdiction over prediction markets.
The dispute has already produced conflicting rulings in federal appellate courts, raising the possibility that the U.S. Supreme Court could eventually be asked to settle the issue.
Last week, the U.S. Court of Appeals for the Sixth Circuit ruled that sports bets on Kalshi are not swaps. The Eighth Circuit reached the same conclusion in a similar case. But the Third Circuit had previously held that the CFTC had proper jurisdiction over prediction markets, leaving a federal-level legal split in place.
Filings gave little detail and no rule text
The White House disclosures, dated Sept. 28, did not include additional detail or the text of either rule. The CFTC said both were not 「economically significant」.
Agency is operating with one commissioner
By law, the CFTC is structured as a five-member commission. President Donald Trump has not nominated additional commissioners so far, leaving Mike Selig as the agency’s only member.
As a result, Selig has been acting alone on regulatory and policy decisions.
OMB disclosures also point to a crypto-focused prerule
The same OMB disclosures show that the CFTC recently submitted a crypto-regulation prerule to the White House, though the agency did not describe the shape of that effort.