The CFTC is preparing two new rules that could reshape one of the biggest legal fights surrounding prediction markets. The agency has sent both measures to the White House for review as it looks to clarify where event contracts fit under federal derivatives law.
The timing is important because courts are already wrestling with that exact question. Kalshi and other federally regulated exchanges argue that their event contracts fall under the Commodity Exchange Act. At the same time, states contend that sports-related contracts can still be regulated under state law.
The CFTC is Drawing a New Line
The two rules approach the issue from opposite directions. One would exclude casino-style products from the legal definition of a swap, while the other would explicitly include event contracts within that definition.
Neither rule has been publicly released in full, so plenty of details remain unknown. Based on their titles, however, the CFTC appears to be trying to establish a clearer boundary between event contracts and traditional casino-style products.
The two actions currently look like this:
- Casino-style products would be excluded from the swap definition
- Event contracts would explicitly fall within the swap definition
- Both measures have reached White House review
- The actual regulatory language has not been released
That last point matters. Until we see the text, it's too early to know exactly how broadly the CFTC intends to define either category.
Why One Word Matters So Much
Much of the current legal fight comes down to whether sports event contracts qualify as "swaps." It sounds like a technical argument, but the answer could have major consequences for who regulates these products. The Sixth Circuit recently rejected Kalshi's argument that its sports contracts qualified as swaps while considering cases involving Ohio and Tennessee.
Other courts have reached different conclusions on broader questions involving federal authority, leaving exchanges and states without one consistent national answer. If the CFTC explicitly puts event contracts inside the swap framework, federally regulated exchanges would have another argument supporting their position. States are unlikely to accept that interpretation, which could spark another round of legal challenges.
The Supreme Court Could Eventually Weigh In
The regulatory process is also unfolding while the dispute moves closer to the Supreme Court. New Jersey has already asked the justices to review an appellate decision involving Kalshi and whether federal derivatives law prevents states from applying their own rules. The Supreme Court has not agreed to hear the case.
Still, the growing number of lawsuits and differing appellate decisions make the federal-versus-state question increasingly difficult to ignore. That creates an unusual situation. Courts are interpreting existing law while the CFTC is simultaneously working to clarify how it believes that law should apply to modern prediction markets.
New Rules Won't End Every Court Fight
Even if both CFTC measures become final, you shouldn't expect the legal disputes to disappear overnight. States and other challengers could contest the agency's interpretation, forcing courts to decide how much weight the new definitions should carry.
What the industry could finally get is a clearer federal position. Exchanges, regulators and judges have spent much of 2026 arguing over statutory language that wasn't written with today's prediction market industry in mind.
The Trade Handle Prediction Markets Take
We've watched the state-versus-federal fight become one of the biggest prediction market stories of 2026. These two rules could give everyone a much clearer idea of where the CFTC believes its authority begins and where state power should end. The most interesting part is that regulation and litigation are now moving at the same time.
Whatever the CFTC ultimately publishes could quickly become part of ongoing court arguments. Two new definitions won't settle every disagreement. Still, explicitly separating event contracts from casino-style products could become one of the CFTC's most consequential prediction market moves yet.