The Commodity Futures Trading Commission has filed two proposals that would classify event contracts as "swaps" under federal law while explicitly excluding traditional casino gambling from that definition. Both measures, filed on Friday, carry 30-day comment windows.

The move directly addresses the escalating conflict between federal regulators and state authorities over prediction-market operators including Kalshi and Polymarket. Several states have sued those platforms, alleging illegal gambling. The CFTC has countersued to defend what it claims is exclusive federal jurisdiction over event contracts, arguing they fall outside the purview of state regulators.

Together, the two proposals help set the stage for a potential US Supreme Court battle over where federal authority ends and state authority begins.

What does the first proposal change?

The first measure clarifies the CFTC's definition of "swap" to include event contracts tied to sports, politics, cultural events and weather. It frames these contracts as financial instruments commonly known to the trade as swaps and proposes to resolve any lingering ambiguity about their status.

"These products are commodity derivatives squarely within the CFTC's regulatory remit under the Commodity Exchange Act and are within the agency's exclusive jurisdiction," Chairman Michael Selig said.

If adopted, the clarification would give operators a clearer federal hook for listing contracts on elections, sporting outcomes and other real-world events — while simultaneously stripping states of a central argument that such products constitute unlicensed gambling.

How does the CFTC carve out casino gambling?

The second proposal codifies the Commission's position that casino-style gambling products, including wagers placed on sportsbooks and casino games, sit outside the "swap" definition.

"Casino-style gambling products are not derivatives," Selig said. "Just as the CFTC has done with respect to other products historically regulated by the states, the Commission today provides clarity regarding the limits of its regulatory remit by codifying the exclusion of casino-style gambling products from the 'swap' definition."

The distinction is strategic. By conceding that pure gambling products remain under state control, the CFTC strengthens its claim that event contracts — which it views as financial instruments — belong exclusively to Washington. The carve-out narrows the surface area of the federal-state dispute to the products themselves rather than a blanket assertion of authority.

Why does the appellate record matter?

The proposals arrive amid a fractured circuit split that has already reached the Supreme Court's doorstep.

In late September, the 6th US Circuit Court of Appeals ruled against Kalshi, with a three-judge panel siding unanimously with Ohio and Tennessee. The panel found the prediction market failed to demonstrate that its sports-event contracts are "swaps" under CFTC jurisdiction, allowing the two states to regulate them under their gambling laws.

That decision cut against an April ruling by the 3rd Circuit Court of Appeals, which allowed Kalshi to keep operating in New Jersey while its appeal proceeds. The April decision said Kalshi was likely to succeed on its argument that federal law preempts New Jersey's regulations.

A group of state lawmakers has since filed an amicus brief urging the Supreme Court to hear the dispute between Kalshi and state gaming authorities. The justices' eventual answer could determine whether prediction-market companies answer to the CFTC in Washington or to dozens of individual state gaming commissions.

The NFL has also backed New Jersey authorities in a SCOTUS petition concerning Kalshi, adding institutional weight to the states' side of the fight.

What happens next?

The immediate deadline is procedural: stakeholders have 30 days from Friday's filing to submit comments on both proposals. The CFTC will then decide whether to finalize the swap-definition clarification and the casino-gambling exclusion — rulemakings that would harden the agency's litigation posture before the Supreme Court decides whether to take up the Kalshi case.