The US Commodity Futures Trading Commission (CFTC) has submitted two significant proposals to the White House Office of Information and Regulatory Affairs that could reshape the regulatory landscape for event contracts and prediction markets. These draft rules aim to clarify the definition of a “swap” in relation to online gaming and betting products, potentially affecting how certain prediction market offerings are governed in the United States.
Proposed Changes Could Redefine Event Contracts
According to iGamingBusiness, one of the draft proposals (RIN: 3038-AF82) seeks to expand the definition of a swap to include event contracts. A separate proposal is under review to determine whether gaming-style products, such as blackjack and craps, should be excluded from swaps altogether. If adopted, these changes could prevent Designated Contract Markets (DCMs) from offering contracts based on online casino-style games, which would directly impact the business models of some prediction market operators.
Industry and Regulatory Responses
The CFTC’s actions come after two recent setbacks in federal circuit courts regarding the oversight of prediction markets. Legal battles, including a notable case in Tennessee involving Kalshi, have spotlighted the ongoing debate over whether certain event-based contracts qualify as swaps under current US law. The timeline for the next stages of the rulemaking process remains uncertain.
During the Global Gaming Expo (G2E) in Las Vegas, industry groups such as the American Gaming Association (AGA) and the Indian Gaming Association expressed strong opposition to the expansion of prediction markets. AGA President Bill Miller argued that most prediction market contracts serve as forms of sports wagering rather than legitimate economic hedging tools. Panelists emphasized concerns over tax revenue loss and the potential threat to the regulated gaming industry, particularly in major states like California and Texas.
Legislative Developments Affecting Sports Betting
Coinciding with the regulatory discussions, the US Senate passed the Protect College Sports Act with wide bipartisan support. Sponsored by Texas Senator Ted Cruz, the bill grants athletic associations the authority to restrict athletes from participating in college sports if they engage in sports betting or event contract wagering. This measure underscores the heightened focus on integrity within both the sports betting and prediction market sectors as the bill moves to the House of Representatives.
Market Growth and Industry Endorsements
Meanwhile, prediction market operator Kalshi is reportedly seeking a major funding round, aiming for a valuation of $40 billion. High-profile athlete endorsements of both prediction markets and sportsbook operators have also made headlines, though some players have publicly distanced themselves from such partnerships. For example, NBA star Victor Wembanyama stated he would not endorse prediction market or sportsbook operators, reflecting the ongoing debate over the role of athletes in promoting betting products.
What’s Next for US Prediction Markets?
The CFTC’s proposals signal a pivotal moment for prediction markets and online gaming operators in the US. If regulators move forward with broader definitions and restrictions, the industry could see significant changes in which products are permitted on regulated exchanges. Industry stakeholders and market participants will be closely monitoring the outcome of the White House review and subsequent regulatory decisions.