US CFTC Proposes to Bring Prediction Market Event Contracts Under Swap Regulation, Seeks Federal Regulatory Authority
51 minutes ago
The U.S. Commodity Futures Trading Commission (CFTC) on Friday issued an interim final rule and proposed another new rule, seeking to further establish its regulatory authority over prediction markets. Under the new proposal, contracts for sports, political, cultural and weather events traded on platforms like Kalshi and Polymarket will be brought under the existing U.S. swap regulatory framework overseen by the CFTC; casino-style gambling is excluded from the definition of swaps. The two rules differ in legal effect and advancement stage: the interim final rule takes effect immediately but remains open to public comments, while the other rule, which explicitly includes event contracts in the definition of swaps, stays in the proposal stage with a 30-day public comment period. The move comes as the CFTC is embroiled in legal disputes with multiple U.S. states over regulatory authority for prediction markets. The states argue that some sports event contracts are essentially gambling operations subject to state-level gambling regulations, while CFTC Chairman Mike Selig maintains that such contracts are financial derivatives under federal agency jurisdiction. The dispute has been brought before the U.S. Supreme Court, and recent rulings from federal appeals courts have shown splits. The new rules could serve as an important basis for the CFTC to support its regulatory stance in subsequent litigation.
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