U.S. CFTC seeks event contract definitions that may defy states' gambling claims
The U.S. Commodity Futures Trading Commission (CFTC) is moving to define event contracts, traded on platforms like Kalshi, as federally regulated financial swaps rather than state-regulated gambling products. This effort aims to assert federal jurisdiction over prediction markets and counter legal challenges from states, despite conflicting federal court rulings on the matter.
Why it matters
This regulatory battle will determine the legal classification and oversight of prediction markets in the U.S., potentially shifting control from state gambling laws to federal financial regulation. The outcome could significantly impact the future of these platforms and may ultimately be decided by the U.S. Supreme Court.
The Commodity Futures Trading Commission has fully embraced a role as the federal regulator of prediction markets and the event contracts they trade in, generally binary yes-or-no bets on the outcome of measurable situations, such as sporting events and elections. To that end, the CFTC has embarked on a campaign to regulate prediction markets such as Kalshi and defend against legal pushback from states insisting they have the power to oversee certain contracts as gambling.
The most recent federal court decision explicitly ruled that Kalshi's sports-tied contracts are not swaps and are subject to state gambling regulations, though an earlier federal ruling had come to a different conclusion.
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