CFTC Interim Rule Excludes Sportsbook Wagers from Federal Swaps Definition

The Commodity Futures Trading Commission has issued an interim final rule that excludes traditional casino gambling products and sportsbook wagers from the federal definition of a swap. Announced on October 9, the rule sets a boundary between derivatives markets under federal oversight and gambling operations regulated by states and tribes. It takes effect upon publication in the Federal Register.

According to reporting by GamblingNews, the measure restates the agency’s long-standing position. CFTC Chairman Michael Selig said the rule makes clear what products are not subject to the commission’s regulatory oversight. “Conventional gambling products should not be seen as financial derivatives simply because the payout depends on the outcome of an event,” he said.

Requirements for Qualifying Gambling Products

The exclusion applies to products licensed or authorized under state law or by federally recognized tribes. Those products must also be regulated as gambling under the relevant legal framework. A second requirement addresses structure: trades may not occur on organized exchanges or other markets where multiple parties bargain or conclude trades.

This approach separates traditional sportsbook bets, where bookmakers set their own odds and take bets directly from customers, from contracts traded on prediction market platforms. The CFTC contends that these structural differences justify separate regulatory treatment even if the two products relate to the same event.

Disputes Over Sports Prediction Markets

The commission highlighted the classic separation between state regulation of gambling and federal oversight of derivatives. It noted that older rules excluded some insurance and consumer transactions from the swap definition despite similarities to instruments covered by the Commodity Exchange Act. The interim rule coincides with a separate proposal to define event contracts linked to sports, politics, cultural developments, and weather as swaps.

States argue that contracts for sports offered by platforms like Kalshi are similar to gambling and should be covered by existing state laws. The CFTC has opposed limits on those platforms, asserting authority under federal derivatives law. Courts have reached different conclusions, creating uncertainty. The rule does not create a presumption that all products outside a particular exclusion are swaps. Each arrangement requires separate evaluation. The CFTC opened a 30-day comment period and may revise the measure based on feedback.

Reporting: GamblingNews

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