CFTC Seeks to Classify Event Contracts as Swaps, but State-Gambling Fight Continues
The Commodity Futures Trading Commission is proposing to treat certain contracts on sports, politics, culture and weather as swaps under federal law. A separate measure would exclude sportsbook wagers and casino games from that definition. Meanwhile, courts are reaching different preliminary outcomes in disputes over state authority.
- The CFTC’s event-contract measure is a proposal, not a final rule.
- A separate interim final rule would exclude casino games and sportsbook wagers.
- Appeals courts have reached different preliminary outcomes in separate cases.
- No nationwide ruling has settled the boundary between federal and state oversight.
Two CFTC actions, two different purposes
Announced on Oct. 9, 2026, the CFTC proposal would expressly include specified event contracts in the definition of a swap under the Commodity Exchange Act. Event contracts pay out based on the outcome of a future event, such as a sports result or election.
A swap is a financial contract covered by federal commodities law. The CFTC says its proposal would reduce uncertainty about whether event contracts fit that category. The proposal rests on the agency’s view that the events in question may have financial, economic or commercial consequences. The agency argues that the law requires a potential consequence, not proof that one has already occurred.
The CFTC cites possible effects of temperature changes on agriculture and energy consumption as examples. That interpretation could reach beyond events that look like conventional financial risks, which is one reason the proposal’s scope matters. The proposal does not, by itself, establish that every prediction contract is a federally regulated derivative.
The commission issued a separate interim final rule to exclude sportsbook wagers and casino games from the swap definition. An interim final rule takes effect without first going through the usual full notice-and-comment process, though the public can still submit comments. The CFTC said the exclusion would take effect upon publication in the Federal Register and would have its own 30-day written-comment period. The stated effective-date trigger does not confirm that publication has already occurred. The action follows the CFTC’s warning against sportsbook-style odds.
The event-contract proposal has a separate 30-day public-comment period, starting when it is published in the Federal Register. The two actions were submitted to the White House’s Office of Information and Regulatory Affairs on Sept. 28, 2026, before the CFTC announced them on Oct. 9. The event-contract proposal is identified as RIN 3038-AF82; the casino-style gambling exclusion is RIN 3038-AF81.
The measures address how the CFTC interprets the federal definition of a swap. They do not resolve the separate question of whether federal law prevents states from enforcing their gambling laws against particular products.
Why the courts are drawing different lines
The dispute has two parts: whether a particular contract qualifies as a swap, and whether federal law displaces state gambling rules that might otherwise apply. “Preemption” is the legal principle that federal law can override conflicting state law. Showing that a contract may fit a federal definition does not automatically settle how far preemption extends.
In April 2026, the Third Circuit preserved a preliminary injunction protecting Kalshi from New Jersey enforcement against the sports contracts at issue. A preliminary injunction temporarily blocks a party from taking specified action while a case proceeds. It is not a final decision on the merits.
The divided court found that Kalshi had a reasonable likelihood of showing that its contracts qualified as swaps and that federal law preempted New Jersey’s rules in this case. The decision concerned contracts traded on a CFTC-registered designated contract market, or DCM, a trading venue registered with the commission. It did not rule that every prediction-market product is exempt from state gambling laws.
The dissent made the competing view clear. Judge Jane R. Roth described Kalshi’s products as “virtually indistinguishable from the betting products available on online sportsbooks” and disputed the majority’s preemption analysis. The central question is whether federal derivatives oversight changes how the law treats a sports-linked contract, or whether states can regulate it as gambling.
Other appeals courts reached different preliminary outcomes in separate cases. On Sept. 25, 2026, the Sixth Circuit rejected Kalshi’s requests for preliminary protection in disputes involving Ohio and Tennessee. It concluded that Kalshi had not shown that the contracts at issue qualified as swaps and found insufficient grounds to displace state gambling laws, even if they did. In August 2026, the Ninth Circuit allowed Nevada to enforce its gaming rules while litigation continued.
Those decisions came from different cases and records, so they should not be treated as final rulings on an identical legal question. Taken together, they show that the regulatory fight over prediction markets remains unsettled.
States and the NFL argue for oversight
New Jersey has asked the U.S. Supreme Court to review whether federal commodities law prevents states from applying sports-gambling laws to contracts traded on a CFTC-registered market. Robinhood Derivatives has also asked the Court to review a Ninth Circuit decision involving Nevada gaming officials. The company argues that federal law gives the CFTC exclusive authority over covered contracts traded on federally regulated markets. Neither request means the Court will necessarily hear the case.
The NFL has urged state oversight, citing consumer protection, inside information and game integrity. In its brief, the league said NFL-related markets accounted for $1.8 billion of $3.3 billion in prediction-market trading on the season’s first Sunday. Those figures were reported by the NFL. They are not an independently audited measure of trading or the amount of money at risk. The dispute has also drawn attention to the NFL and states’ clash over prediction-market regulation.
The league is making the case for stronger safeguards, not proving that prediction markets have caused the harms it cites. Platforms argue that federal oversight can provide a consistent framework. Their claims about the strength of their own safeguards are also positions in a policy dispute, not independent findings.
Not every platform or product faces the same regulatory questions. Kalshi’s New Jersey dispute concerns contracts traded on a CFTC-registered DCM. The Ninth Circuit case involves Robinhood Derivatives and Nevada gaming officials. New York Attorney General Letitia James separately alleged on Sept. 24, 2026, that Polymarket offered sports contracts without a state gambling license and allowed users under 21 to use its platform. New York sought fines, customer restitution and forfeiture of gains it alleged were earned illegally. Those claims have not been adjudicated. James has also filed cases involving Kalshi, Coinbase Financial Markets and Gemini Titan.
Key questions and answers
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Does the CFTC proposal settle whether event contracts are swaps?
No. It lays out the commission’s proposed interpretation but does not settle the legal status of every contract. Any final rule could also face legal challenges.
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Does trading on a CFTC-registered market shield a contract from state gambling laws?
That remains disputed. The Third Circuit granted Kalshi preliminary protection in a specific New Jersey case, while other courts allowed state enforcement to continue in separate disputes.
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Have courts settled the issue nationwide?
No. Decisions so far address specific cases and requests for preliminary relief. They do not establish a final nationwide rule for all prediction-market products.
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Why does the NFL support state oversight?
The league cites consumer protection, inside information and game integrity. Those are its policy arguments, not findings that prediction markets have failed to protect users or games.
The unresolved issue goes beyond whether event contracts resemble bets. It is whether federal derivatives law covers a given product and, if it does, how much authority states retain to regulate it.
