Federal · CFTC interim final rule (RIN 3038-AF81) and proposed rule (RIN 3038-AF82)

Prediction markets vs. sportsbooks: the CFTC says casino-style bets are not "swaps" and proposes that sports and election event contracts are

Interim final rule Oct. 19, 2026 · Comments due Nov. 18, 2026

Published October 19, 2026 · Last updated October 19, 2026

What it does

Federal commodities law, the Commodity Exchange Act (CEA), gives the CFTC jurisdiction over “swaps,” a broad category of financial contracts. An “event contract” pays out depending on whether an event happens, such as the result of a game or an election. The two actions address an “ongoing debate regarding the scope of the Commission’s jurisdiction under the Commodity Exchange Act (‘CEA’), particularly as it relates to event contracts.” (Interim final rule, section I)

• Interim final rule: casino-style gambling is not a swap. It adds a new paragraph (7) to the definition of “swap” in 17 CFR 1.3. Excluded is any contract that (A) is offered by a person licensed or authorized to offer gambling or accept wagers under state law or the law of a federally recognized tribe under the Indian Gaming Regulatory Act, acting within that license, and regulated as gambling under that law; and (B) is not traded on an exchange or other market where trades are executed multilaterally or individually negotiated. Examples listed: wagers accepted by a licensed sportsbook on sporting events; wagers at a licensed casino on table games, slot machines or other electronic gaming devices; and other licensed games of chance “such as bingo, pool wagering, lotteries, and raffles.” (Interim final rule, amendment to § 1.3, paragraph (7))
• Why now, according to the CFTC. The CFTC says recent appeals court decisions (the Sixth and Ninth Circuits) and some states have reasoned that if sports event contracts were swaps, ordinary sports bets would be too, and that this “erroneous premise” has caused confusion. It says the rule is meant to “clarify the boundaries between the Commission’s jurisdiction over the derivatives markets and State and Tribal jurisdiction over casino-style gambling.” The Third Circuit has held that sports event contracts on a CFTC-licensed exchange are swaps. (Interim final rule, section I)
• Proposed rule: event contracts are swaps. The CFTC proposes adding to the swap definition “Event contracts, including those based on sports-, politics-, cultural, and weather-related events.” It says the best reading of the law is that these contracts are swaps, and that its authority to “further define” the term gives an independent basis. (Proposed rule, section II and amendment to § 1.3, paragraph (2)(i)(G))
• How the CFTC distinguishes the two. The CFTC says gambling bets are set by a “house” that takes the other side of the bet, while event contracts trade on CFTC-registered exchanges at market-set prices, are centrally cleared, and are subject to federal “Core Principles.” It acknowledges that “a person can achieve similar economic exposure by either entering into a gambling wager or purchasing an event contract.” (Interim final rule, section II)

Who it affects

• People who trade event contracts on federally registered exchanges (designated contract markets, or DCMs), and the exchanges themselves. Under the CEA, retail participants may trade swaps only on a DCM. (Proposed rule, section II)
• State- and tribe-licensed sportsbooks, casinos and other gaming operators, and the state and tribal agencies that regulate them. The CFTC says the interim rule does not change anyone’s legal rights or obligations because it “already treats casino-style gambling products as outside its jurisdiction.” (Interim final rule, section IV.D)
• States. The CFTC describes actions by several states against event-contract exchanges, including Minnesota’s criminal ban on prediction markets, an Arizona criminal case and a New York request for a restraining order, and a comment from 40 states and the District of Columbia arguing that sports event contracts are “indistinguishable from traditional sports betting.” (Proposed rule, section I; interim final rule, sections I and IV.A)

What it means for you

• No change to South Carolina law. These are federal rules under the CEA. The interim rule says it affirms “the long-standing regulatory authority of States and Tribes” over casino-style gambling. (Interim final rule, section IV.D)
• Taxes are separate. The CFTC says its classifications are for CEA purposes only; federal tax treatment and reporting are determined under the Internal Revenue Code and IRS guidance. (Interim final rule, section II)
• Risks the CFTC flagged. In its proposal, the CFTC says that if the rule increases the number of event contracts listed, retail participants “could be harmed” because some event contract trading characteristics “can be associated with addictive potential,” and that the rule “could be perceived as a safety signal by retail participants.” (Proposed rule, section IV, consideration of costs and benefits)
• You can comment. Comments on either action can be filed at Regulations.gov (search CFTC documents open for comment) or through the “Submit A Public Comment” button on each Federal Register page. Reference RIN 3038-AF81 (interim rule) or 3038-AF82 (proposal). Comments are published, so leave out personal information you don’t want public. (Both documents, ADDRESSES)

Cost and impact

The CFTC says the interim rule imposes no new compliance costs and that its main benefit is reducing legal uncertainty created by conflicting appeals court decisions. OMB determined it is a significant regulatory action but not a “major rule.” (Interim final rule, sections IV.D, IV.F, IV.G) For the proposal, the CFTC says clarity could let more firms operate under federal rules, could favor established exchanges, and may reduce resources spent complying with “sometimes-contradictory State regulatory regimes.” (Proposed rule, section IV)

Current status

The interim final rule was issued October 15, 2026, published October 19, 2026, and took effect on publication; the CFTC found “good cause” to skip advance notice and comment. The proposed rule was published the same day and is not final. Chairman Selig voted for both; no commissioner voted against. (Both documents, DATES and Voting Summary; interim final rule, section IV.A) Separately, New Jersey gaming regulators have filed a petition for a writ of certiorari asking the U.S. Supreme Court to review the Third Circuit’s April 6, 2026 decision in Flaherty v. KalshiEX, LLC (No. 26-299). The response to the petition is due November 9, 2026. (U.S. Supreme Court docket 26-299) The CFTC cites that Third Circuit decision as holding that sports event contracts on a CFTC-licensed exchange are swaps. (Interim final rule, section I)

What happens next

Comments on both documents are due November 18, 2026. The CFTC says it will consider comments and may modify the interim rule. The event-contract proposal is not in effect. (Interim final rule, section III; proposed rule, DATES)

Sources

• Federal Register: Further Definition of “Swap” To Exclude Casino-Style Gambling Products (interim final rule, 2026-21376)
• Federal Register: Further Definition of “Swap”—Inclusions (proposed rule, 2026-21377)
• U.S. Supreme Court: docket No. 26-299, Flaherty v. KalshiEX, LLC

Every statement above is drawn from the official source text linked here; section references are shown in grey. This is a plain-English summary, not legal advice. Spot an error? Tell us.