New Move in U.S. Gambling Cases Against Platforms: Could the CFTC Shift the Balance?

The U.S. Commodity Futures Trading Commission (CFTC) has launched a process that could affect states’ gambling lawsuits by sending two regulatory actions for review that could change the legal definition of contracts in prediction markets.

According to CoinDesk, the two regulatory actions reached the White House Office of Management and Budget (OMB) this week. At the center of the debate are contracts tied to the outcome of specific events, traded on platforms such as Kalshi, Polymarket, Crypto.com and Robinhood.

Financial contract or gambling product?

The CFTC’s first step is to expand the definition of a swap to include event-based contracts, a type of financial contract it oversees. The second step is to prepare an interim final rule that would exclude casino-style gambling products from the definition of a swap.

These two distinctions matter in lawsuits arguing that the platforms provide illegal gambling services in the states. If event-based contracts are treated as swaps subject to federal oversight and kept separate from gambling products, the legal arguments underlying the states’ lawsuits could be weakened.

Power struggle between the CFTC and the states

In particular, the CFTC is opposing state interventions in lawsuits against Kalshi. Commission Chair Mike Selig argues that prediction markets fall exclusively under the CFTC’s jurisdiction, and the commission is suing states in line with that position.

Conflicting rulings from federal appeals courts are increasing the likelihood that the jurisdictional dispute could eventually be brought before the U.S. Supreme Court.

Both regulatory actions under review

The OMB review is one of the steps that precedes opening the regulations to public comment. The interim final rule could take effect immediately once issued, while remaining open to comments and changes. The impact of the measures, which are still under review, on state lawsuits will become clear as the regulations are finalized and the legal process unfolds.