CFTC Interim Rule Excludes State-Licensed Sportsbook Bets from Swap Definition After Appellate Court Setbacks

The Commodity Futures Trading Commission released an interim final rule that states bets placed with state- or tribal-licensed sportsbooks and casinos are not swaps under the Commodity Exchange Act and fall outside CFTC regulation. The rule directly addresses federal court rulings that had equated sports event contracts with traditional wagers, creating potential overlap in jurisdiction.

CFTC Chairman Michael Selig stated that casino-style gambling products are not derivatives. Selig added that the Commission provides clarity on the limits of its regulatory remit by codifying the exclusion. This development, as reported by SBC Americas, coincides with the U.S. Supreme Court weighing New Jersey’s petition in Flaherty v. KalshiEX, which drew supporting briefs from gaming regulators, 39 states and the District of Columbia, and the National Football League.

Targeting Erroneous Premises in Sixth and Ninth Circuit Rulings

The interim rule responds to decisions from the Sixth and Ninth Circuits that ruled against Kalshi after finding no legal distinction between a sports event contract and a sportsbook wager. Those courts reasoned that if one qualified as a swap, the other must as well, which would bring all sports bets under federal oversight. The Commission labeled this premise erroneous and noted it read limits into the swap definition not present in the statute.

Selig’s separate notice on proposed rulemaking seeks to define swaps to include event contracts based on sports, politics, cultural, and weather-related events. The agency cited support from the Third Circuit’s April ruling for Kalshi, which observed that Congress granted power to further define swaps in far-fetched scenarios. The interim rule implements that suggested approach and takes effect upon publication in the Federal Register, with comments due in 30 days.

Limits of the Distinction and Remaining Uncertainty

The CFTC outlined five differences between event contracts and sportsbook bets: central order book trading versus fixed odds, clearinghouse mechanisms, specific statutory treatment of gaming event contracts, federal oversight of listed contracts since the 1990s, and derivatives industry classification as swaps. The agency acknowledged that similar economic exposure is possible through either product but maintained this does not render them identical, comparing the pair to insurance and credit default swaps.

The rule does not alter existing legal treatment of sportsbooks, which the CFTC already views as outside its jurisdiction. Its primary stated benefit is reducing interpretive uncertainty. Yet the distinction rests on regulatory interpretation that the Supreme Court may ultimately test, leaving prediction market platforms exposed to ongoing litigation risk even as licensed operators receive clearer boundaries.

The Path Ahead for CFTC Jurisdiction

This framework reinforces separate lanes for state-regulated gaming and federally overseen derivatives. Sportsbook operators gain concrete protection from swap classification, but event contract platforms must navigate tighter definitions in the forthcoming rulemaking. The comment period and pending Supreme Court action will determine how cleanly the boundary holds in practice.

Reporting: SBC Americas

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