New Move in U.S. Platform Gambling Debate: Will Oversight Shift Away From States?
The U.S. Commodity Futures Trading Commission (CFTC) has issued a rule that defines gambling separately and a proposal aimed at clarifying federal authority, seeking to keep event contracts on platforms such as Kalshi and Polymarket under its oversight.
According to CoinDesk, the agency’s two actions on Friday, October 9, are part of an ongoing jurisdictional dispute with states that view sports trading on these platforms as gambling. The debate centers on whether these trades should be overseen by state gambling authorities or the federal regulator, the CFTC.
Gambling and event contracts are separated
The interim final rule, which took effect immediately, excludes casino-style gambling from the definition of a “swap.” A swap is a type of financial contract that falls under the CFTC’s federal oversight. The agency thus aims to distinguish traditional gambling activities from the scope of its claimed authority; public comments will also be accepted while the rule is in effect.
A separate proposal would explicitly include contracts based on the outcomes of events such as sports, politics, culture and weather under swap regulations. A 30-day comment period has been set for the proposal covering these contracts, which are traded on platforms such as Kalshi and Polymarket.
States continue to challenge federal authority
States argue that trades based particularly on sports results are subject to their own gambling laws. The CFTC, meanwhile, holds that event contracts fall under its federal authority. While the new proposal aims to put this position into regulation, it has not yet been finalized, and the legal battle continues.
The dispute has been brought before the U.S. Supreme Court. Federal appeals courts have issued differing rulings so far: one ruling rejected the states’ position, while two supported the states.
In the oversight debate that previously involved the NFL, the focus is now on the regulator’s attempt to change its own rules.
CFTC seeks to strengthen its position in court
TD Cowen policy analyst Jaret Seiberg viewed the interim final rule as a move to strengthen the CFTC’s position in court. Whether it will be enough to overcome legal challenges remains uncertain.
Companies such as Kalshi want the CFTC to be recognized as their sole regulator. This means the debate centers not only on what the contracts are called, but also on which agency’s rules the platforms will be subject to.