CFTC moves to regulate prediction markets

TLDR

The US CFTC is advancing formal rules to bring prediction market event contracts under federal derivatives regulation, but the proposals are not yet in force.

1. The CFTC has sent paired rules to the White House that would classify event contracts as swaps while carving out casino-style gambling products.
2. These definitions aim to assert CFTC jurisdiction over platforms like Kalshi and Polymarket, amid conflicting court rulings and state gambling lawsuits.
3. Crypto users should watch for the final rule text, comment process, and court outcomes, which will shape how on-chain and centralized prediction markets can operate in the US.

Deep Dive

1. What The CFTC Just Did

Recent filings show the CFTC submitted two prediction market actions to White House regulatory review: a proposed rule titled Further Definition of Swap to Include Event Contracts and an interim final rule, Further Definition of Swap to Exclude Casino-Style Gambling Products event-contract definition rules.

Both remain under review and have not been published in the Federal Register, so they are not binding yet. The swap-inclusion rule is expected to go through a public comment period, while the casino-style exclusion could take effect more quickly once published, with comments afterward.

2. Impact On Prediction Markets And Crypto

Event contracts are binary bets on outcomes such as elections or sports. Platforms including Kalshi, Polymarket, Crypto.com, and Robinhood offer these products and have argued they belong under federal derivatives law, not state gambling codes jurisdictional fight with state gambling regulators.

States and some courts have disagreed. The Sixth and Eighth Circuits recently ruled against treating certain Kalshi sports contracts as swaps, reinforcing state gambling authority, while a Third Circuit case favored CFTC jurisdiction. The proposed definitions seek to resolve that split and could either strengthen regulated markets legal position or, depending on their scope, constrain what they can list.

For crypto, US-facing on-chain prediction markets and centralized exchanges offering event-style derivatives may need to match whatever swap definition and exclusions the CFTC finalizes, including registration, risk controls, and reporting.

3. What To Watch Next

Several moving pieces will decide the outcome:

1. Publication of the full rule text and opening of the comment period in the Federal Register.
2. How the final rules treat sports, mixed-use, and crypto-related contracts, and whether they clearly preempt state gambling laws.
3. Ongoing lawsuits and the possibility of a Supreme Court case to resolve the circuit split on prediction market jurisdiction states still in court.

Until those steps play out, platforms, traders, and on-chain projects face uncertainty around which products are treated as regulated derivatives versus prohibited gambling, and what compliance burdens will apply.

Conclusion

The CFTCs move to define event contracts as swaps while excluding casino-style gambling is a major attempt to settle who regulates prediction markets in the US. For crypto-linked venues and users, the eventual rules and court decisions will determine which markets can operate legally, under what obligations, and how much room remains for innovative on-chain prediction products.