CFTC proposals aimed at separating prediction markets from casino gambling
The two measures attempt to set the stage for a potential US Supreme Court battle over federal and state jurisdiction.
The Commodity Futures Trading Commission (CFTC) has proposed two measures aimed at distinguishing prediction markets from casino gambling. These proposals could lead to a potential Supreme Court battle over federal and state jurisdiction. The first proposal clarifies the definition of "swap" to encompass event contracts, such as those related to sports, politics, cultural events, and weather.
The CFTC claims these contracts are financial instruments and are subject to federal regulation under the Commodity Exchange Act. Chairman Michael Selig stated that these products fall squarely within the CFTC's regulatory remit and jurisdiction. The second proposal excludes traditional casino gambling products, including wagers on sportsbooks and casino games, from the "swap" definition, classifying them as non-derivatives.
Both measures are open for 30 days of public comment. The proposals also set the stage for a possible Supreme Court case. A lower court ruled that prediction market Kalshi lost its appeal when a court found that Ohio and Tennessee could regulate sports-event contracts under their state gambling laws. A higher court allowed Kalshi to operate in New Jersey during the appeal process.
This situation has sparked debate over jurisdiction between state and federal authorities, prompting a group of state lawmakers to file an amicus brief urging the Supreme Court to weigh in on the case.
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