CFTC proposes swap definition covering sports event contracts, report says

iGaming Business reports that on 9 October the US Commodity Futures Trading Commission (CFTC) released a notice of proposed rulemaking that would expressly define swaps to include event contracts based on sports, politics, cultural and weather-related events. The proposal arrives while federal appeals courts disagree on whether sports event contracts are swaps or sports wagers.

For operators and affiliates, the proposal sets a 30-day comment window and a clear line on casino-style games, which it would keep outside the swap definition.

What happened

According to iGaming Business, the CFTC released the notice on 9 October, hours before the start of a busy football weekend. The agency has historically recognised most event contracts as covered by the Commodity Exchange Act, and the new text seeks to widen the swap definition further.

CFTC Chairman Michael Selig said in a statement: "Americans use event contracts to hedge risks, speculate and provide the public with information about the outcome of future events," and described the products as within the agency's exclusive jurisdiction.

The Third Circuit majority held that the outcomes of sports event contracts are tied to possible commercial or economic consequences. In another example, the commission said the Knicks' playoff frenzy generated about $380 million for the New York economy.

Other courts have gone the other way:

• Ninth Circuit (August): found that Kalshi's sports event contracts do not qualify as swaps. Judge Ryan Nelson indicated that courts should view them as sports wagers rather than risk-transfer financial instruments.

The proposal also excludes casino-style games from the swap definition. In an 11 October note, Citizens wrote that Kalshi and Polymarket are unlikely to begin offering such games, and analyst Jordan Bender added that they will not be a "base-case concern" for investors.

Mike Dreitzer, who chairs the Nevada Gaming Control Board, spoke at the American Gaming Association's Global Gaming Expo, where he questioned the legality of the contracts and accused prediction markets of deceptive conduct. According to the AGA, the contracts are responsible for more than $1 billion in lost state tax revenue.

Why it matters

Operators and affiliates with exposure to prediction-market products should check now which legal regime their activity would sit under, and whether to file comments before the window closes. The CFTC takes the position that event contracts fall within its exclusive jurisdiction, while the Ninth Circuit has held that Kalshi's sports contracts are not swaps. Contracts, partnerships and promotion plans built on one reading could need revisiting if the Supreme Court takes the case.

The exclusion of casino-style games is likely to reduce near-term concern among casino operators and suppliers that blackjack-type products could migrate into event contracts. Stakeholders appeared incensed by that scenario earlier this year.

The state-level argument is also likely to continue, with regulators such as Nevada's chairman continuing to press their concerns. Companies working across both sides of the sector will need to follow the federal rulemaking and the court path in parallel.

What's next

The CFTC will publish the proposal in the Federal Register. According to the CFTC, the public should submit comments within 30 days of publication.