The CFTC wrote casino bets out of the swap definition. Here is what its two new rules actually say.

Explainer · Updated October 10, 2026 · 18+ · Not legal advice · By BetG8 Editorial · Prediction Markets

What was published, and when it bites

The two documents are numbered RIN 3038-AF81 (the interim final rule, or IFR) and RIN 3038-AF82 (the notice of proposed rulemaking, or NPRM). They left the Office of Information and Regulatory Affairs in under two weeks, which CoinDesk called "an especially speedy process", and were released on a Friday afternoon. We covered the submission in The CFTC sent two prediction market rules to the White House; at that point neither text was public. Now both are, at about 40 pages each, and the details matter more than the headlines.

The exclusion is a two-part test

The IFR does not say "sports betting is not a swap". It says a contract is outside the swap definition when it passes both a provider test and a product test. The provider test asks whether the offeror is licensed or otherwise authorised under state law or the Indian Gaming Regulatory Act, is acting within that licence, and whether the contract is regulated as gaming or gambling under that state or tribal law. The product test asks whether the contract is traded on a board of trade, an organised exchange, a swap execution facility, or "any other market" where trades are executed multilaterally or individually negotiated. A sportsbook taking a bet as principal under house rules passes both. A contract on a CFTC-designated exchange fails the product test by design.

Three categories are then named as examples: sports wagers, casino games, and other licensed games of chance. Two things the text is careful to say are easy to miss. First, a product that fails the exclusion is not automatically a swap; it still needs its own analysis. Second, unlicensed gambling may also sit outside the swap definition, which means the rule is not a federal licence for offshore books either. The rationale leans on the 2012 exclusions for insurance and consumer transactions and on a reading of Dodd-Frank that Congress "did not give the CFTC authority over gaming products themselves".

Why the CFTC needed the exclusion before the inclusion

The sequencing is the point. In the Sixth Circuit's 25 September decision for Ohio and Tennessee, and the Ninth Circuit's 28 August decision for Nevada, the courts reasoned that if a Kalshi sports contract is a swap, then a sportsbook wager must be one too, with the absurd result that every retail sports bet since 2012 was federally illegal unless it traded on an exchange. The IFR removes that premise by regulation: the sportsbook bet is excluded, so the exchange contract can be a swap without dragging the sportsbook with it. SBC Americas read the preamble the same way, noting that the agency calls the premise of the Sixth and Ninth Circuit rulings "erroneous" and says the rule "implements the Third Circuit's suggested approach", a reference to the April ruling for Kalshi in New Jersey that said Congress let regulators "further define" swaps.

The IFR lists five differences between an exchange event contract and a sportsbook bet: prices set on a central order book rather than by the house, clearing through a clearinghouse, a special congressional rule for "gaming" event contracts, federal oversight of exchange-listed event contracts since the 1990s, and the derivatives industry's own classification. It concedes that "a person can achieve similar economic exposure" through either product, and answers with the insurance-versus-credit-default-swap analogy. Whether that analogy survives contact with the Supreme Court is the open question. Jaret Seiberg of TD Cowen told clients the interim rule appears "designed to improve the agency's position in court", adding: "Whether this actually works is a different question."

The volume figures the two rules cite do not match

Both documents use trading volume to justify urgency, and they use strikingly different numbers. The IFR's good-cause section cites "$24 billion in trading volume in April 2026 on two prediction markets" and "tens of billions of dollars of transactions". The NPRM's cost-benefit section, drawing on non-public daily trade data that exchanges report to the agency under rule 16.02, says that in August 2026 "average monthly trading volume in event contracts was about $1.5 billion across all DCMs reporting to the Commission", of which roughly $1.2 billion was sports, $11 million politics and $4 million weather.

We do not know why the agency's own exchange data lands an order of magnitude below the public figures. The likeliest explanations are a different counting convention (Pew values every contract at its $1 payout, so a 10-cent contract counts as a dollar, while a regulator may count premium paid), the exclusion of Polymarket's offshore venue, which is not a DCM, or both. The gap is worth flagging because the NPRM also uses its figures to argue that the politics and weather categories are small enough that the rule changes little. On the public numbers, politics alone has been running at about $2bn a month on Polymarket this year.

What the proposed rule does not do

The NPRM's operative text is a single sentence and adds no new conditions. It does not require clearing, it does not define "event contract", and it does not touch the special rule in CEA section 5c(c)(5)(C), under which the Commission can still prohibit gaming-related contracts it finds contrary to the public interest. Instead it points to the separate June 2026 proposal (91 FR 35806) that would weigh price discovery and hedging utility in those determinations, which is the document the NFL's Supreme Court brief said "falls well short". The proposal counts at least seven DCMs offering sports contracts to US persons as of 1 September and more than fifteen DCM applications pending since 2025.

The preemption argument is also thinner than the press release suggests. The NPRM says the rule would "clarify" the CFTC's exclusive jurisdiction and reduce conflicts among state regimes, and cites the 2000 Commodity Futures Modernization Act provision that preempted state gaming law for certain institutional off-exchange swaps. It does not say that swap status alone preempts state law for retail contracts, and the Sixth Circuit has already held that even if the contracts were swaps, the Commodity Exchange Act "neither expressly nor impliedly preempts" Ohio's or Tennessee's gambling laws. A definition cannot overrule that holding; only Congress or the Supreme Court can.

The procedural exposure

Two features of the IFR will be litigated before its substance is. The first is the use of the good-cause exception to skip notice and comment. The agency says this "is not a case where the CFTC seeks to circumvent the APA", and cites Arizona's criminal case against a DCM, enforcement actions in Minnesota and New York, and "the economic consequences of the shuttering of prediction markets on a state-by-state basis". The American Economic Liberties Project's Ashley Nowicki answered on 1 October that "interim final rules are meant for emergencies" and that "the real emergency here is the prevalence of these bets". The second is authorship. Chairman Mike Selig is the only sitting member of a five-seat commission and signed both documents alone, a fact 39 states and the NFL have already placed in front of the Supreme Court as evidence that the agency lacks the capacity to regulate what it claims.

Kalshi's response to New Jersey's petition in No. 26-299 is due on 9 November. The 30-day comment windows on both rules will close at roughly the same time. If the justices take the case, the question of whether an agency can define its way into exclusive jurisdiction will be decided with these two documents on the table. See Will the Supreme Court take the Kalshi case? for the calendar and the NFL's brief for the integrity arguments.

Method and limits

Rule text, regulatory identifiers, the two-part test, the volume figures and the good-cause language are taken from the IFR and NPRM documents published on cftc.gov on 9 October 2026, both marked "subject to pre-publication technical corrections"; page numbers refer to those pre-publication versions and may shift in the Federal Register. Federal Register publication and comment deadlines were not set at the time of writing. The Seiberg quotation is as reported by CoinDesk; the Nowicki quotation is from her organisation's 1 October statement. The $53bn July figure is Pew's, as reported by Forbes, and uses a face-value convention. We have not independently reconciled the CFTC's rule 16.02 data with public venue figures and do not claim to know the cause of the gap. This page is not legal advice.

Frequently asked questions

Does the new CFTC rule make sports betting at a sportsbook illegal?

No. It does the opposite: it writes into regulation that a wager taken by a state- or tribally licensed sportsbook or casino, as the house and not on an exchange, is not a swap and is outside CFTC jurisdiction. The CFTC says this codifies its existing position.

Does it make Kalshi and Polymarket contracts legal in every state?

No. The interim final rule excludes casino-style products; it does not declare exchange contracts to be swaps. That is the job of the separate proposed rule, which is not in force. Even if it were, the Sixth Circuit has held that swap status does not by itself preempt state gambling law, and the Supreme Court is weighing New Jersey's petition on the question.

When does the interim final rule take effect?

Immediately on publication in the Federal Register, under the Administrative Procedure Act's good-cause exception. Comments on both rules are due 30 days after each is published. As of 10 October neither had appeared in the Federal Register.

What volume figures does the CFTC use?

The interim final rule cites $24bn traded in April 2026 on two prediction markets. The proposed rule, using exchanges' own confidential reports, puts average monthly event contract volume across all DCMs in August 2026 at about $1.5bn, with about $1.2bn in sports. Public estimates such as Pew's $53bn for July are far higher and use a face-value convention.

Who signed the rules?

Chairman Mike Selig, the only sitting commissioner on the five-member CFTC. No other commissioners have been nominated.

Sources

• CFTC, Release 9309-26: CFTC Issues Interim Final Rule Excluding Certain Activity from the Definition of Swap and the interim final rule text (RIN 3038-AF81), 9 October 2026.
• CFTC, Release 9310-26: CFTC Seeks Public Comment on Notice of Proposed Rulemaking Concerning the Inclusion of Certain Event Contracts in the Definition of Swap and the proposed rule text (RIN 3038-AF82), 9 October 2026.
• CoinDesk, U.S. CFTC moves to fold event contracts into swaps regulations as legal fight rages, 9 October 2026.
• SBC Americas, New CFTC rule on swaps appears driven by appellate rulings, 9 October 2026.
• Sports Betting Dime, CFTC to exclude casino-style gambling products from swap definition, 9 October 2026.
• American Economic Liberties Project, CFTC is rushing to shield prediction markets from state gambling laws, 1 October 2026.
• Forbes, Prediction markets hit $53 billion a month, 6 October 2026.

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