TheBlock
The CFTC has sent two proposed event-contract rules to the White House for review: one would expand the definition of swaps to include event contracts, while the other would exclude casino-style gambling products. The proposals arrive as prediction markets such as Polymarket and Kalshi, each valued at tens of billions of dollars, face mounting legal challenges over sports betting.
Why it matters
The central dispute is whether sports event contracts fall under federal derivatives oversight or state gambling laws. The CFTC says most prediction-market contracts, including sports contracts, are swaps under its jurisdiction. States argue that platforms violate local gambling rules, including requirements related to age limits and taxes, and several have sued. The CFTC has filed countersuits seeking to block state oversight.
A federal appeals court last week rejected Kalshi's argument that federal law shields its sports contracts, ruling that Ohio and Tennessee can enforce their sports-gambling laws against the platform. The dispute could reach the Supreme Court: New Jersey's attorney general has asked the court to review the issue as courts have taken different positions.
Market impact
The casino-style-products proposal is at the interim final rule stage. Gaming lawyer Daniel Wallach said such a rule would take effect immediately without the usual notice-and-comment period, potentially leaving it open to challenges under the Administrative Procedure Act. He warned that language extending beyond casino-style products to sports contracts could prompt immediate litigation.
The outcome could determine how prediction-market platforms structure sports offerings and which regulators oversee them. The CFTC has also filed crypto rulemaking with the White House, as federal digital-asset legislation remains stalled after the Clarity Act failed in a Senate procedural vote earlier this month.
Frequently asked questions
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What event-contract rules has the CFTC sent to the White House?
One proposal would expand the definition of swaps to include event contracts. The other would exclude casino-style gambling products.
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Why are states challenging prediction-market sports contracts?
States argue that the platforms violate local gambling laws, including rules related to age limits and taxes. The CFTC maintains that most such contracts fall under its federal jurisdiction.
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What did the appeals court decide in Kalshi's case?
The court ruled that Ohio and Tennessee can enforce their sports-gambling laws against Kalshi, rejecting the platform's argument that federal law shields its sports contracts.
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Why could the casino-style-products rule face a quick legal challenge?
The proposal is at the interim final rule stage and could take effect immediately without the usual notice-and-comment period. Gaming lawyer Daniel Wallach warned that its scope could prompt litigation under the Administrative Procedure Act.
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Could the Supreme Court review the dispute over sports event contracts?
The issue could reach the Supreme Court. New Jersey's attorney general has asked the court to review it as courts have taken different positions.
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