The regulator published a proposed rulemaking plan Friday (Oct. 9), part of an ongoing legal fight around the prediction markets sector. That proposal is designed to remove “any ambiguity regarding these contracts,” the CFTC’s announcement said.
“Americans use event contracts to hedge risks, speculate, and provide the public with information about the outcome of future events,” said Chairman Michael S. Selig. “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.”
Selig has maintained that the commission has sole authority over the prediction market industry, led by companies like Polymarket and Kalshi. This argument has faced pushback from state agencies, who say that the prediction platforms are illegal gambling businesses.
Federal courts have found for both sides, meaning the issue is likely on its way to the Supreme Court.
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Along with its proposal to include events contracts under the definition of swaps, the CFTC has also proposed a measure that would exclude “casino-style gambling products” from that definition, PYMNTS wrote last month.
“If the CFTC succeeds in defining event contracts as swaps while distinguishing them from casino-style gambling products, prediction market operators would gain a stronger regulatory argument that their contracts belong inside the federal derivatives framework,” that report said.
But federal courts have found the CFTC’s exclusive jurisdiction provision does not itself surpass state gambling laws, “even assuming the contracts do qualify as swaps,” PYMNTS added.
Meanwhile, the National Football League (NFL) told the Supreme Court last week that the league wants local gambling regulators to govern prediction markets.
The NFL submitted an amicus brief to the high court, arguing that its concerns about prediction markets and potential risks for game integrity and consumer protection have not been answered by the CFTC.
Kalshi spokesperson Elisabeth Diana told CoinBase last week that the company has tried to work with the NFL and noted it has partnerships with other professional sports leagues, including Major League Baseball and the National Hockey League.
“We have consistently tried to engage proactively and constructively with the NFL to collaborate on market integrity with no response,” Diana said in the report.
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