CFTC Proposes Regulatory Distinction Between Prediction Markets and Gambling

The US Commodity Futures Trading Commission (CFTC) has issued an interim final rule excluding casino-style gambling from the definition of a “swap,” alongside a proposal to explicitly include prediction-market event contracts. The gambling exclusion takes effect upon publication in the Federal Register, while the change to event contracts is a proposal.

Announced on October 9, the two measures address the scope of federal derivatives regulation. The gambling rule excludes sportsbook wagers and casino games from the definition of a swap, formalizing what the agency describes as its longstanding position. 

CFTC Chairman Michael 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.

Under the proposed rule, the term “swap” would expressly include event contracts based on sports, politics, cultural, and weather-related events. According to the CFTC, these financial instruments are already recognized as swaps within the trade. The agency said its proposal would resolve ambiguity about their classification and provide greater clarity for the market.

Selig said: “These products are commodity derivatives squarely within the CFTC’s regulatory remit under the Commodity Exchange Act and are within the agency’s exclusive jurisdiction.”

The CFTC is accepting written comments on both measures through Regulations.gov. 

Around the world, prediction markets have raised regulatory concerns about illegal gambling, market manipulation, and inadequate consumer protections. Platforms have faced bans or blocking orders in Singapore, France, and Argentina, while Dutch authorities ordered Polymarket to stop offering unlicensed gambling or face penalties.