The US Commodity Futures Trading Commission (CFTC) has taken a new step to assert full oversight over prediction markets. The federal regulator issued proposed rules expanding the definition of ‘swaps’ to encompass event contracts, or contracts tied to the outcome of real-world events. Alongside the proposal, the agency released an interim final rule that explicitly exempts traditional casino-style gambling products from the newly expanded definition.
The legal maneuver is designed to serve one primary objective: strengthening the CFTC’s claim that federal law grants it exclusive authority over swaps traded on regulated exchanges. If the expanded classification takes effect, oversight of prediction market platforms such as Polymarket and Kalshi would fall squarely under federal jurisdiction. The draft proposals are currently being reviewed by the Office of Information and Regulatory Affairs.
Clash with State Regulators
The proposed reclassification immediately triggered strong pushback from state regulators. They oppose the CFTC’s stance, with their objections focused heavily on sports event contracts. Local authorities argue that sports wagering falls squarely under gambling, meaning such contracts must comply with individual state gambling laws rather than federal oversight.
For the CFTC, codifying the expanded swap definition provides firmer legal footing to fend off intervention from state authorities. This jurisdictional tug-of-war marks the latest chapter in an ongoing legal battle. Kalshi previously suffered a defeat at the appeals court level over similar jurisdictional limits. The dispute over regulatory boundaries is widely expected to escalate to the US Supreme Court.
Tens of Billions in Valuation Await Certainty
The inter-agency power struggle comes at a pivotal moment for the platform’s business trajectory. Kalshi is currently working on a $1 billion fundraising round aiming for a $40 billion valuation, a funding effort that was previously reported. Such a lofty valuation demands clear regulatory rules of the road.
The jurisdictional dispute highlights the blurring line between financial instruments and wagering products. Until legal authorities establish a definitive boundary between swaps and gambling, prediction market operators remain caught between two regulatory layers, neither of which is willing to back down. Reported by Cointelegraph.
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
