The CFTC has sent prediction market rules to the White House. States are still in court

Two CFTC event-contract actions reached White House review on September 28. One would define swaps to include event contracts. The other, labeled an interim final rule, would exclude casino-style gambling products. Five days earlier, a federal appeals court held that the sports contracts before it were not swaps and allowed Ohio and Tennessee to apply state gambling laws. The agency’s proposed line is arriving while judges are still drawing theirs.

The Office of Information and Regulatory Affairs docket lists RIN 3038-AF81, “Further Definition of ‘Swap’ to Exclude Casino-Style Gambling Products,” as an interim final rule under review. It lists RIN 3038-AF82, “Further Definition of ‘Swap’ to Include Event Contracts,” as a proposed rule. Both arrived September 28. The titles and procedural stages are public. Their complete regulatory text was not published in the Federal Register at the time of this article, so any confident account of precise definitions would outrun the available document.

That procedural distinction matters. A proposed rule ordinarily seeks comment before a final rule. An interim final rule can take effect with a post-publication comment period if the agency follows applicable law and supplies the required reasons. Neither becomes binding merely because OIRA received it. Review can change wording, timing or even whether a measure is issued. The review log records the agency’s submitted action, not a completed settlement of the legal question.

The pairing is the story. A broad inclusion of event contracts in the swap definition could support federal derivatives oversight. An exclusion for casino-style gambling products could leave a category outside that definition. Where the boundary sits will determine whether some sports contracts look like federally regulated swaps, state gambling products or both under competing legal theories. The two titles do not tell us whether the agency plans a bright-line sports exclusion, a test based on economic use, or exceptions. Those answers need actual text.

The CFTC’s March advance notice sought information on core principles, public-interest review, inside information and the types of event contracts that may be prohibited. It acknowledged that the Commodity Exchange Act does not define “event contract” as a stand-alone term and that such products can fall within swaps or futures. The September review entries are a later regulatory step. They should not be confused with the March request for information, which set out questions rather than a rule already in force.

The court conflict starts with the word swap

On September 25, the Sixth Circuit’s Kalshi opinion addressed state efforts in Ohio and Tennessee to regulate sports-event contracts. The court rejected the platform’s claim that these contracts necessarily qualified as swaps under the federal statute for purposes of displacing state gambling authority. It vacated an injunction in Tennessee and upheld denial of one in Ohio. Those are interim litigation outcomes with serious practical effects, not a nationwide final resolution for every contract.

The Third Circuit’s earlier New Jersey opinion reached a more favorable result for Kalshi’s federal-preemption position in a different record. The split is not a license to state that prediction markets are either uniformly legal or uniformly illegal nationwide. It means geography, the specific event contract and the posture of the case affect what a platform can offer while appeals continue. Our account of the court split provides the wider map; the new feature is what an agency definition can and cannot resolve within it.

The statutory construction is not a vocabulary exercise. Congress gave the CFTC authority over swaps and futures on designated contract markets, subject to public-interest restrictions for categories including gaming. A business that offers contracts on sports can claim federal exchange supervision. A state can respond that betting on a game is gambling within its police power and outside the federal definition of a swap, or not preempted even if some federal oversight applies. An agency may interpret its governing statute through a rule, but a court decides whether the interpretation fits the statute and how federal law interacts with state law.

A new rule could change the arguments in pending cases. It will not automatically erase prior judicial holdings, cancel state statutes or grant an exchange a gambling license. The Sixth Circuit analyzed the law and products before it. Parties may seek reconsideration or higher review, and a court could assess a later rule. Until that happens, the September 28 OIRA entries are evidence of regulatory intent, not judicial preemption.

JUST IN: Kentucky Rep. James Comer expands prediction market insider-trading probe to https://t.co/W5zHqS1uq1, Hyperliquid, and PredictIt

The House Oversight chairman sent letters seeking information on how the platforms verify users and detect suspicious trades, following a May… pic.twitter.com/ngU1ngqfVU

— crypto.news (@cryptodotnews) September 29, 2026

A common label hides different contracts

The phrase “prediction market” covers a contract on a CPI release, a corporate earnings metric, a presidential election and the winner of a football game. Each can be structured as a yes-or-no payoff. That payoff shape alone does not settle its statutory character or the state’s gambling interest. The CFTC’s March notice cited different potential uses: price discovery, hedging, public information and speculation. A one-dollar binary settlement can support all four depending on the underlying event and who trades it.

The Commission’s own figures show the scale of the definitional problem. Its March notice says designated contract markets certified about five new event contracts per year on average from 2006 through 2020, but approximately 1,600 in 2025. That is roughly 320 times the old annual average, using 1,600 divided by five. It does not mean trading volume grew 320 times, because a count of listed contracts is not a count of trades or open positions. It means a product-by-product review regime now faces a much larger menu.

The fresh rules can be seen as an attempt to classify that menu. If an inclusion rule defines the event-contract family broadly, an exclusion rule must specify what keeps casino-style products out. If the exclusion is narrow, states may argue their sports laws still apply. If broad, financial exchanges may argue it bars contracts that could have a genuine hedging use. The full definitions will decide whether the CFTC has resolved a category or merely relocated a fight to terms like “gaming,” “economic consequence” and “public interest.”

Our explanation of contract self-certification is relevant here. An exchange may certify that a new listing complies with federal requirements, and the CFTC can review or challenge it through specified procedures. Self-certification is not a court judgment that every state-law objection has disappeared. A platform can be a CFTC-regulated exchange and still litigate whether a particular offering enters a state’s gambling regime. These questions concern different legal powers.

The exclusions may be the hardest part to write

The casino-style rule’s title suggests a line that sounds intuitive: distinguish an economic event derivative from a gambling product. Actual markets blur that intuition. A bookmaker and an exchange can both let people take a position on a match. An event contract tied to rain could hedge an outdoor business or serve as entertainment for someone with no exposure. One cannot infer purpose from a yes-or-no payoff alone, nor from a customer’s claim that they are hedging.

The statutory gaming provision gives the CFTC a public-interest review path for specified activities. That is not necessarily the same thing as saying a gambling-style product never counted as a swap in the first place. The September AF81 title specifically invokes a further definition of “swap” to exclude casino-style products. The legal effect of an exclusion from the definition could be more sweeping than a decision that an otherwise valid swap should not be listed for public-interest reasons. The agency’s explanation must clarify how these routes fit together.

Suppose a hypothetical exchange lists a contract paying $1 if Team A wins. A person can use it to offset a revenue exposure from a local event, while most counterparties treat it as a wager. If an agency classifies solely by one hedger’s intent, enforcement becomes hard and similar contracts may receive different treatment depending on who trades. If it classifies by the contract’s underlying event, a weather contract with both commercial and entertainment demand may be swept into one bucket. This example illustrates a drafting problem. It is not a claim about the unpublished text.

States have a stronger argument when a product resembles the activity they already license, tax and restrict by age. The exchanges have a stronger argument that a federally designated market cannot function if the same standardized contract is subject to contradictory state prohibitions. Those claims should be assessed against the specific product and statutory language. A rule’s preamble can explain the agency’s rationale, but calling a contract a swap does not itself settle the scope of federal preemption.

The states can enforce while the review continues

Ohio and Tennessee are not waiting for a Federal Register notice. The Sixth Circuit’s September 25 judgment permits their cases to proceed without the injunctions Kalshi sought at that stage. Other states and courts have different records. New York’s recent litigation against Polymarket shows the fight extends beyond one exchange, though the allegations and procedural posture differ. A platform may respond by restricting access in certain states, changing contracts or continuing to litigate. None of those choices tells us how the forthcoming rules will be drafted.

A customer sees the practical effect as a location restriction, a market unavailable for new positions or changed settlement terms. An exchange’s federal registration status may remain intact while one category of product is contested in a state. That distinction is why traders should not infer from a national app interface that every contract is available under a settled nationwide rule. The operator’s notices and the relevant court order matter more than a marketing claim about federal oversight.

The agency also faces an enforcement allocation question. If casino-style products are outside the swap definition, which authority investigates manipulation, insider information and customer complaints involving them? State gambling regulators have tools tailored to licensed sportsbooks. The CFTC has market-surveillance powers for derivatives. A product that falls between regimes may receive uneven oversight, while an operator subject to both could face conflicting obligations. The exclusion must account for that boundary, not merely state a preference about which regulator should win.

The public debate often assumes that every bettor wants a binary answer about legality. Courts issue narrower decisions. The September 25 opinion concerned specific sports contracts and injunction requests. A subsequent rulemaking could alter the legal terrain; it cannot render every unresolved state action moot by announcement. The credible path is to track each docket and each product class as the proposed and interim final texts appear.

The exchange case deserves its strongest form

Kalshi argues that federally regulated exchanges need one coherent rulebook for standardized derivatives. A contract’s price can aggregate information about an event, and an exchange can apply surveillance, collateral and market-integrity requirements that an unregulated offshore site may not. The CFTC’s March notice itself recognizes event contracts as possible swaps or futures and asks how existing market principles should apply. Crypto.news has covered the tension around wash trading claims, which underscores why federal monitoring can matter even when a particular allegation is disputed.

A patchwork of state bans could make an exchange incapable of offering the same contract to counterparties across the country. It could push demand into less visible venues and reduce the quality of price discovery. That is a real consequence, not simply an industry’s plea for light regulation. The Third Circuit’s favorable ruling in the New Jersey dispute gives the federal-preemption argument judicial support, even though the Sixth Circuit reached a different outcome.

The states’ answer is also substantial. Congress did not plainly hand every form of sports betting to a federal commodities regulator when it enacted swaps provisions. States have long set age rules, licensing conditions, taxes and consumer protections for gambling. If a venue can convert a sports wager into a nationwide exchange product by changing its name, those state choices become fragile. The Sixth Circuit’s reading gives that objection legal force in Ohio and Tennessee.

The real disagreement is over statutory coverage and the consequences of coverage. Both sides can agree that a contract pays on a sporting result and that federal and state regulators have interests in fraud prevention. A forthcoming agency definition may persuade a court on the first point, but its power depends on the statute. It cannot write Congress’s intent anew. The best test of the rule will be the reasoning a judge gives when applying it to an actual listed contract.

Follow the publication sequence, then the litigation

OIRA review is a checkpoint, not a launch. First watch whether the White House review concludes and what action the CFTC publishes. Then read the regulatory text, effective date, comment deadline and explanation for any interim final procedure. For AF82, compare the proposed inclusion to the existing statutory swap definition and to the March notice. For AF81, check precisely what counts as casino-style gambling and whether the agency addresses sports, elections and mixed-use contracts separately.

Next, watch whether the Commission changes how it handles self-certified contracts. An exchange can list products under existing procedures while a proposed definition is pending unless another lawful restriction applies. A rule that eventually excludes a category may require an orderly transition, potentially affecting open positions. The details would have to appear in the published action; the OIRA title offers no basis to forecast a forced closeout or a grandfathering clause.

Then watch the courts. Kalshi and state officials can cite the new text in ongoing cases, but judges will evaluate statutory authority and the relevant case record. An appellate disagreement may invite Supreme Court review, yet a petition is not a granted hearing and a hearing is not a ruling. The fastest moving product and the slowest moving legal process are now sharing a calendar. That is the source of the industry’s uncertainty.

JUST IN: US judge temporarily blocks Minnesota prediction market ban

The ruling finds federal law likely preempts the state’s first in the nation restriction pic.twitter.com/OsC6QoyzPK

— crypto.news (@cryptodotnews) July 28, 2026

There are limits to this feature. No unpublished rule text has been treated as fact. No one court’s holding has been generalized to every state or every contract. The agency may narrow its drafts in review or after comments. The analytical point that will survive those changes is the need to distinguish inclusion in federal derivatives law from displacement of state gambling law. The two questions can be asked together. They do not necessarily receive the same answer.

A rule can also interact with open interest in ways a court order alone does not. A market that accepted contracts under existing exchange procedures may have positions extending past the new rule’s effective date. If the rule excludes those contracts from the swap definition, the agency and exchange must say whether new positions stop while existing ones settle, whether transfer or closeout is allowed and what protects the collateral posted by customers. None of those outcomes follows from the OIRA stage label. They belong in the published text and implementation notices. Without them, traders may mistake a classification change for an immediate cancellation of a payout.

The exchanges’ contracts have an additional dependency: the event’s resolution source. A football game has a league record; an economic release has a statistical agency and possible later revisions; a corporate earnings metric can be restated. The new definition could classify each based on its underlying event, yet an exchange still has to specify exactly which source and timestamp settle the contract. State gambling authorities may scrutinize terms such as voided games and participant eligibility. The CFTC may examine manipulative activity around an official report. Those concerns persist even if jurisdiction becomes clearer. A classification rule is a gate to oversight, not the oversight program itself.

Another overlooked actor is the broker or app that distributes exchange contracts. It may be regulated for other financial services and may market a sports event contract beside securities or crypto products. An exchange winning a federal jurisdiction argument does not automatically tell a distributor which state residents it may onboard or what disclosures it must show. If a contract is barred in one state, a national front end has to enforce location restrictions, handle travelers and manage positions opened before a restriction. The customer experiences legal fragmentation through that interface. The party that operates the market and the party that offers a button to buy are not always the same.

The CFTC could choose a narrow rule that leaves hard examples to case-by-case review. That has an advantage: new products can be examined on their facts. It also leaves exchanges with uncertain planning costs and states with a reason to press every close case. A broad rule can offer predictability but is more vulnerable if its line sweeps too far beyond the statute. The two September submissions imply the agency is trying to use both approaches at once, a general inclusion and a named exclusion. The full text will reveal whether they fit together.

The first real test is a contract that crosses the line

When the rules appear, readers can perform a more useful exercise than counting how often they use the word “innovation.” Pick a listed sports contract and a listed economic-data contract. Apply the proposed inclusion definition to both. Then apply the casino-style exclusion to both. Record which clauses produce different results. If the line turns on a platform’s registration, the same economic payoff may change character depending on the venue. If it turns on the underlying event, the exchange’s use of standardized risk controls may not matter. If it turns on commercial purpose, the agency must explain how a general public market proves that purpose.

The exercise exposes any collision between the two texts. An instrument can meet a broad inclusion test and also trigger a narrower exclusion. The rule should specify priority: does exclusion override inclusion, or does the exchange undertake a public-interest review of a swap that remains a swap? The answer affects jurisdiction, product listing and a state’s preemption argument. A reader should not have to infer it from a press conference. The regulatory text should resolve it.

A second test is the record of comments. States, tribal authorities, exchanges, sportsbooks, hedgers and consumer advocates will have different stakes. A serious final explanation responds to material objections, especially the Sixth and Third Circuit readings, the gaming provision and what happens to existing open contracts. If the agency disregards those points, litigation will focus on the gap. If it addresses them, the courts still decide whether the statute permits the answer.

The September 28 filings are thus both significant and limited. They show the CFTC has moved from gathering comments toward concrete definitions. They have not made a single sports contract lawful in every state or closed a state enforcement case. The market underneath will be shaped by the eventual text, the products it reaches and the judges who read it.

The eventual rule will face a third test beyond classification and litigation: administrability. A platform may list hundreds of contracts whose descriptions differ by a single statistic, team or date. A definition that requires the regulator to infer each trader’s purpose cannot be applied consistently at that scale. A definition based on the underlying event is easier to automate but can misclassify contracts whose economic use crosses categories. The CFTC should publish worked examples with reasons, including a close case, so exchanges, states and customers can understand its interpretation before millions of positions depend on it.

The public record should also separate dollar volume, notional value and open interest. A contract that pays $1 on an outcome can change hands many times before settling. Summing every trade as though it were a new dollar of risk exaggerates outstanding exposure. Counting listings has the opposite limitation: 1,600 new contracts can carry very different liquidity and customer stakes. If the agency cites market growth to justify a rule, it should provide the denominator and period. Courts deciding preemption may care about the character of a product; consumers and enforcement agencies also care about how much money is at risk.

One can imagine a final definition that a federal court accepts and a state still challenges on a separate ground, such as age restrictions or deceptive marketing. Preemption is not an all-or-nothing adjective attached to a company. It is a legal argument about a particular state requirement and a particular federal statute. A platform may defeat a ban on the underlying contract while still facing generally applicable consumer-protection rules. The forthcoming actions might sharpen the statutory question, but no OIRA docket entry can substitute for that requirement-by-requirement analysis.

That is why the next useful headline should be a clause from the published rule, not another announcement that Washington is interested in prediction markets. The clause must tell a sports trader, an economic hedger and a state regulator what separates their products. If the text cannot do that, the courts will keep supplying their own answers.

JUST IN: Washington state judge grants preliminary injunction against Kalshi

The ruling deems the prediction market activities illegal gambling under state law pic.twitter.com/u7rY35nZw4

— crypto.news (@cryptodotnews) July 21, 2026

What to watch

• OIRA outcome: Completion or withdrawal of AF81 and AF82 review, followed by actual Federal Register text.
• Definition boundary: Whether a sports contract satisfies the proposed inclusion and the casino-style exclusion simultaneously.
• Effective dates: Any transition treatment for open contracts under an interim final exclusion.
• State dockets: Injunctions, amended complaints or appeals in Ohio, Tennessee and New Jersey after publication.
• Exchange listings: State-level product access and self-certification changes for the same contract type.

FAQ

Disclaimer: This article is for information and educational purposes only and does not constitute financial or investment advice. Figures reflect regulatory filings and reporting available at the time of writing and change with each disclosure. Nothing here is a recommendation to buy, sell, or hold any security or asset. Always do your own research. Information is accurate as of October 1, 2026.