The Commodity Futures Trading Commission (CFTC) announced on Friday (9) two measures to delimit the regulation of prediction markets in the United States. The agency proposed including contracts tied to sports, political, cultural and weather events in the definition of swaps, derivative financial instruments. Simultaneously, it published an interim rule that excludes from this classification traditional bets from casinos and sports betting houses.
The measures establish a distinction between financial contracts traded on prediction markets and conventional gambling products. While the first seeks to clarify which instruments are subject to federal oversight, the second delimits that jurisdiction, keeping traditional bets outside the definition of swaps.
According to the CFTC, contracts whose payment depends on future events may fall under the Commodity Exchange Act. The proposal aims to eliminate regulatory ambiguities regarding instruments used for speculation, risk protection and probability trading.
CFTC distinguishes between event contracts and conventional bets
The distinction is especially evident in contracts linked to sports results. A financial instrument traded on a prediction market may depend on the winner of a match without automatically receiving the same treatment as a bet placed at a traditional sportsbook.
The interim rule establishes that casino games and conventional sports bets do not constitute swaps. With this, the agency formalizes the separation between federally supervised financial instruments and betting products traditionally regulated by American states.
This differentiation, however, does not end the legal disputes between prediction market platforms and state authorities over the limits of federal jurisdiction.
The two measures also have distinct legal effects. The explicit classification of event contracts as swaps is still a proposal, subject to public consultation. The exclusion of traditional bets, meanwhile, was published as an interim final rule, effective upon its publication in the Federal Register.
In both procedures, the CFTC established 30 days for public comments, counted from the publication of each document in the Federal Register, and not necessarily from October 9.
