The US Commodity Futures Trading Commission (CFTC) proposed two rule amendments on Friday, Oct. 10, 2026, aimed at separating prediction markets from casino gambling. The first proposal classifies event contracts - spanning politics, sports, culture, and weather - as swap instruments under federal law. The second proposal explicitly excludes casino products and sportsbooks from that definition.
CFTC Chair Michael Selig immediately affirmed his agency’s authority, describing prediction contracts as “commodity derivatives squarely within the CFTC’s regulatory remit” under the Commodity Exchange Act. Both proposals are now open for a 30-day public comment period before a final decision is made.
The battle puts oversight of the roughly $1.8 billion market at stake, which has long been contested between federal authorities and state officials.
Who Gets to Regulate Betting
Prediction markets Kalshi and Polymarket are now caught in a jurisdictional dispute. Several state governments have sued both operators over allegations of facilitating illegal gambling. The CFTC responded with a countersuit to defend its federal authority after previously seizing regulatory oversight of Kalshi and Polymarket from state authorities.
The federal swap classification provides event contracts with a national legal umbrella that preempts local gambling laws. However, efforts to unify regulatory interpretation have been hindered by a split among appellate courts.
Split Decisions in Appeals Courts
The US Court of Appeals for the Sixth Circuit ruled against Kalshi, determining that Ohio and Tennessee have the right to regulate sports event contracts under state gambling laws. That ruling granted local authorities full power to crack down on prediction market products within their jurisdictions.
In contrast, the US Court of Appeals for the Third Circuit allowed Kalshi to operate in New Jersey pending appeal in April 2026. The conflicting decisions across circuits have left the legal status of event contracts fragmented from state to state.
Lawmakers Take Dispute to the Supreme Court
Citing widening uncertainty, a group of state lawmakers filed an amicus brief with the US Supreme Court. The brief urges the justices to step in and clarify the jurisdictional boundaries between federal regulators and state authorities.
For Kalshi and Polymarket users, this next chapter will determine their trading access. If the Supreme Court rules in favor of the CFTC, the $1.8 billion event contract market will operate uniformly under federal derivatives regulations. If the states prevail, platform availability will remain fragmented along state lines.
Reported via Cointelegraph.
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