CFTC Moves to Define Prediction Market Event Contracts as Swaps
Updated October 7, 2026
Updated October 7, 2026
The CFTC is taking another step toward deciding how prediction markets should be regulated in the United States.
Two new regulatory actions were sent to the White House for review on September 28. One would further define event contracts as swaps, while the other would exclude casino-style gambling products from the same definition.
In simple terms, the CFTC appears to be working on a clearer line between federally regulated prediction markets and traditional gambling. That could be important for platforms such as Kalshi and Polymarket as their battles with state regulators continue.
What Is a Swap?
A swap is a type of financial contract where the value or payment depends on something else happening or changing. In prediction markets, that could mean whether the Fed cuts interest rates, inflation reaches a certain level, or a specific event occurs.
The two actions have complicated names, but the basic idea is much simpler. Event contracts tied to real-world outcomes could fall within the federal derivatives framework, while casino-style games would be kept outside it.
Here are some simple examples:
Event Contracts | Casino-Style Games |
|---|---|
Fed rate decision — Will the Fed cut rates in December? | Roulette — Where will the ball land? |
Inflation — Will inflation exceed 3%? | Blackjack — Will the player's hand beat the dealer? |
Sports — Will the Yankees win the World Series? | Slots — Will the random spin produce a winning combination? |
Based on an external real-world event | Outcome generated by the game itself |
Could fall under the federal derivatives framework | CFTC proposal would keep these outside the swap definition |
The key difference: Prediction market contracts settle based on something happening in the real world. Casino games generate the outcome themselves.
The event-contract proposal is not final, and the full text has not been published yet, so we don't know exactly which contracts would be covered. The CFTC currently explains that event contracts are typically structured as swaps, although they can also be structured as futures.
This goes straight to one of the biggest fights surrounding prediction markets.
Platforms operating through federally regulated exchanges argue that their event contracts fall under federal commodities law and CFTC oversight. Several states have pushed back, particularly when those platforms offer contracts on sports.
The disagreement essentially comes down to one question: Are sports prediction markets federally regulated financial markets, or are they gambling products that states can regulate?
That question has already produced lawsuits, cease-and-desist orders and restrictions across the country. A clearer definition from the CFTC would not automatically settle those disputes, but it could become an important part of the legal battle over who gets to regulate prediction markets.
The timing isn't surprising. Prediction markets have expanded rapidly into sports, politics, economics, financial markets and entertainment, while companies such as Kalshi, Polymarket and Robinhood have brought the industry much closer to the mainstream.
The numbers show how quickly things have changed. In its 2026 prediction market rulemaking, the CFTC said regulated exchanges certified approximately 1,600 event contracts in 2025. Between 2006 and 2020, the average was only around five per year.
The agency has spent much of 2026 looking at prediction-market regulation, including sports contracts, market manipulation and which types of events should be allowed. These latest actions are another step toward creating clearer rules.
Both actions are now under White House review, and the most important details are still missing. The event-contract proposal would also need to move further through the federal rulemaking process before becoming final.
For now, the bigger takeaway is fairly simple. The CFTC is working toward clearer rules for treating event contracts as federally regulated financial products while separating them from casino-style games.
With states increasingly challenging prediction-market operators, how the CFTC draws that line could have major consequences for Kalshi, Polymarket and the rest of the U.S. prediction market industry.
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