CFTC Carves Licensed Sportsbooks Out of the Swap Definition and Proposes to Write Event Contracts In

The Commodity Futures Trading Commission has published the two rules it sent to the White House last month: one, in force the day it appears in the Federal Register, says a bet with a licensed sportsbook or casino is not a swap; the other proposes that event contracts, sports included, are. The line runs through who sells the product and where it trades, not what it is.

• The Commodity Futures Trading Commission (CFTC) on 9 October issued an interim final rule excluding "casino-style gambling products" from the definition of a swap, and a proposed rule adding event contracts, "including those based on sports-, politics-, cultural, and weather-related events"
• The exclusion applies only to products from operators licensed under state or tribal law that are not traded on an exchange or other multilateral market, so a bet at a sportsbook is excluded while the same exposure on a CFTC-registered exchange would, under the proposal, be a swap
• The interim rule takes effect on publication without prior comment; neither text had reached the Federal Register by 12 October, so the effective date and both 30-day comment deadlines are not yet fixed
• Both texts say the Securities and Exchange Commission (SEC) "joins" them, but both are signed only by the CFTC's Secretary; neither contains a pre-emption clause or amends Rule 40.11
• The rules land as the Supreme Court weighs New Jersey's petition in Flaherty v. KalshiEX, No. 26-299, with Kalshi's response due on 9 November and Nevada's answers to Robinhood and Crypto.com due on 13 and 16 November

The CFTC Publishes the Rules It Sent the White House and Shows Where It Draws the Line

The CFTC announced both measures on Friday 9 October, formalising the two rules the Office of Information and Regulatory Affairs received on 28 September. "Casino-style gambling products are not derivatives," said Chairman Michael Selig of the interim final rule, RIN 3038-AF81. Of the proposal, RIN 3038-AF82, he said event contracts "are commodity derivatives squarely within the CFTC's regulatory remit under the Commodity Exchange Act and are within the agency's exclusive jurisdiction."

The exclusion, a new paragraph (7) in the swap definition at 17 CFR 1.3, has two tests. The provider must be licensed to offer gambling under state law, or tribal law under the Indian Gaming Regulatory Act, act within that licence, and offer a product regulated as gambling there. The product must not trade on an exchange, a swap execution facility "or any other market in which trades are executed multilaterally or subject to individual negotiation". Three categories are named: sports wagers accepted by a licensed sportsbook; table games, slot machines and other electronic gaming devices; and other licensed games of chance, "such as bingo, pool wagering, lotteries, and raffles".

The CFTC concedes that "a person can achieve similar economic exposure by either entering into a gambling wager or purchasing an event contract", but argues the structures differ: a sportsbook sets the price as principal, while exchange contracts trade on a central order book and are cleared. It calls the exclusion non-exclusive, suggesting a casual bet between friends or an illegal sportsbook may also not be a swap.

The Proposal Rests on Four Arguments, and Mostly on Sports

The CFTC argues event contracts are "commonly known to the trade" as swaps, citing thousands of self-certified contracts and comment letters from CME Group and Cboe Global Markets; that they meet the "potential financial, economic, or commercial consequence" test the Sixth Circuit said sports outcomes fail; that many are binary options; and that its power to "further define" swap is an independent basis. Rule 40.11, which the Ninth Circuit relied on, "does not provide a basis to conclude that event contracts are not swaps", it says, while noting it can still bar gaming contracts contrary to the public interest under its June proposal, which treats contracts on a single play or pitch more sceptically than markets on longer periods of play.

The proposal's figures show what is at stake. At least seven registered exchanges offered sports contracts to US persons on 1 September, with more than 15 applications pending. Of about $1.5 billion in event-contract volume it cites for August 2026, about $1.2 billion was on sports, $11 million on politics and $4 million on weather. Its cost analysis accepts that states "might receive less fee and other revenue", and that federal certainty "could be perceived as a safety signal by retail participants".

Selig is the commission's only sitting member, so neither rule carries a dissent. No state regulator or attorney general had published a response by Monday.

The Exclusion Is Built to Answer the Courts' Hardest Question

Both appellate defeats turned on one objection: if Kalshi's sports contracts are swaps, so is every bet in a casino or "between two friends at a bar", a Sixth Circuit line the interim rule quotes. The exclusion is the CFTC's limiting principle, written into regulation. The states have already rejected its premise. Forty states and the District of Columbia told the CFTC in April that sports event contracts are "indistinguishable from traditional sports betting", the rule records, and the 39 states backing New Jersey argue the same in the Supreme Court. A test built on who holds a licence and how trades are matched does not dispute that; it says the venue decides. It also cuts both ways: a licensed sportsbook running an exchange-style book would fall outside the exclusion.

A Definition Is Not Pre-emption, and the SEC's Role Is Unproven

Neither text says state law is displaced. The proposal claims "added certainty" about exclusive jurisdiction while admitting the benefit "may be limited" by states, and the Sixth Circuit held that even swaps would not pre-empt state gambling law. The firmest footing is the express power to "further define" swap, which the Supreme Court's 2024 Loper Bright decision accepts as a basis for agency discretion, but Dodd-Frank gives it to the CFTC and SEC jointly. The texts assert that the SEC "joins"; the SEC's press releases are silent, and opponents have a procedural target.

The Clocks Converge in November

If both rules are published this week, their comment periods close alongside Kalshi's and Nevada's Supreme Court deadlines. Kalshi and its allies can then cite a rule in force and a proposal pending to argue the Court should wait, a case former CFTC chairman Gary Gensler and the American Gaming Association have already rebutted. The interim rule's good-cause finding, which rests on the state litigation itself, is the package's most exposed part.

The CFTC has written down the limiting principle the courts said was missing. Whether a line drawn around licences and order books persuades judges who saw the same bet on both sides is now a question for the Supreme Court.