CFTC interim rule excludes sportsbook wagers and casino games from federal swap definition

The Commodity Futures Trading Commission has formally excluded traditional casino gambling products, including sportsbook wagers, from the federal definition of a swap. The interim final rule, announced on October 9, is intended to mark the boundary between derivatives markets and gambling activity overseen by state and tribal authorities.

The rule takes effect on publication in the Federal Register, and the agency has opened a 30-day comment period before it considers any changes. CFTC Chairman Michael Selig said the measure clarifies which products fall outside the commission's remit. He argued that conventional gambling products should not be treated as financial derivatives merely because their payout depends on the outcome of an event.

Two conditions apply for a product to qualify for the exclusion. First, it must be offered by an operator licensed or authorized under state law or by a federally recognized tribe, and be regulated as gambling under the relevant legal framework. Second, the product must not be traded on an organized exchange or in another market where multiple parties negotiate or conclude trades.

That structural test is what separates traditional sportsbook bets from contracts traded on prediction market platforms. Bookmakers set their own odds and take wagers directly from customers, whereas prediction markets let participants trade contracts on exchanges where prices reflect the interaction of buyers and sellers. The CFTC maintains that these differences justify separate regulatory treatment, even when both products relate to the same event.

The commission also pointed to the long-standing division between state gambling regulation and federal oversight of derivatives. It noted that earlier rules excluded certain insurance and consumer transactions from the swap definition even though they resembled instruments covered by the Commodity Exchange Act.

The move comes as the CFTC advances a separate measure that would define event contracts, covering sports, political developments, cultural events and weather, as swaps. Together, the two actions give a clearer picture of the agency's approach: qualifying event contracts on a regulated exchange fall under its jurisdiction, while traditional casino and sportsbook wagers do not.

The question remains contested. State regulators have sued prediction-market operators, arguing that sports contracts offered by platforms such as Kalshi resemble gambling and fall under state law. The CFTC has defended its authority over qualifying contracts, and courts have reached differing conclusions. The interim rule does not presume that every product outside the exclusion is a swap, so individual arrangements may need separate evaluation.