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CFTC Proposes New Definition for Swaps to Regulate Prediction Markets
The Commodity Futures Trading Commission (CFTC) has proposed a new definition of swaps that aims to regulate prediction markets more effectively. This proposal, issued on October 9, 2026, seeks to classify event contracts related to sports, politics, culture, and weather as swaps, thereby placing them under federal oversight. This move comes amid ongoing debates in several U.S. states regarding the classification of these markets as gambling activities.
The CFTC's proposal includes an Interim Final Rule that explicitly excludes casino-style gambling products, such as sports wagers and casino games, from being classified as swaps under the Commodity Exchange Act. The proposed rule focuses on event contracts traded on designated contract markets (DCMs), which are federally registered exchanges where futures and similar products are traded. By establishing this distinction, the CFTC aims to clarify its jurisdiction over prediction markets while delineating its authority from state gambling laws.
CFTC Chairman Michael S. Selig has emphasized that the agency believes it has exclusive federal jurisdiction over these markets. The proposal is intended to formalize this position, especially as courts have issued mixed rulings on the matter. Some decisions have favored state authority, while others have upheld federal preemption, which allows federal law to take precedence over state law in certain areas. The CFTC's actions are now open for public comment, with a 30-day period for feedback from various stakeholders, including market platforms and state officials.
Source: KLEA News