The U.S. Commodity Futures Trading Commission (CFTC) has proposed to classify event contracts as swaps while explicitly excluding casino-style gambling, including betting with bookmakers, from this definition.

CFTC's Proposal

The regulatory body’s draft rule includes event contracts related to outcomes in sports, politics, culture, and even weather within its definition of swaps. The CFTC noted that the industry has already regarded these instruments as swaps.

This new regulation aims to eliminate any ambiguity surrounding their classification.

CFTC Chair Michael Selig explained the rationale behind the need for such products and why the CFTC should regulate them:

“Americans use event contracts to hedge risks, speculate, and inform the public about potential outcomes of future events. These products are commodity derivatives that clearly fall under the CFTC's regulatory authority as defined by the Commodity Exchange Act.”

Limits of CFTC Authority

In tandem, the CFTC clarified the boundaries of its authority. The agency adopted an interim final rule that reiterates its longstanding position: bets placed at sportsbooks and casino games do not qualify as swaps.

This regulation will take effect immediately upon publication in the Federal Register.

“Casino-style gambling products are not derivatives,” Selig emphasized.

He stated that the commission has acted similarly in the past regarding other products traditionally regulated by states.

The CFTC will accept comments on both documents for 30 days following their publication.

This distinction is central to the jurisdictional dispute. If event contracts are classified as swaps, platforms like Kalshi and Polymarket would fall under CFTC oversight rather than state gambling regulators.

Several states have already filed lawsuits against operators of prediction markets, accusing them of running illegal gambling operations. In response, the CFTC has sought judicial intervention to defend its jurisdiction.

The new documents formalize proposals submitted to the White House by the agency at the end of September. However, the ultimate decision may rest with the U.S. Supreme Court.

Investigation into Kalshi

According to The Wall Street Journal, Kalshi has initiated an investigation into trades related to the appointment of a new White House press secretary. At least three bets on Kathy Zachariah securing the position appeared on the platform before media outlets reported President Trump's decision.

A project representative confirmed the investigation but declined to comment further.

Reports from The New York Times and other outlets indicated that Trump selected Zachariah around 2:00 PM Eastern Time (9:00 PM MSK) on October 9. Analysis of Kalshi's open data by WSJ revealed at least three bets placed on her prior to this announcement:

  • $19 — around 10:42 PM Eastern Time on October 8, with a potential payout of $1,896;
  • approximately $74 and $80 — around 1:41 PM on October 9, with payouts of $3,689 and $4,023, respectively.

In total, bets amounting to $173 are expected to yield around $9,600 upon market closure. Notably, in the days leading up to these announcements, traders had assessed Zachariah's chances at only about 1%.

Shortly after, Trump confirmed the appointment via Truth Social. Zachariah will succeed Caroline Levitt in this role.

“I am confident Kathy will deliver strong results for our country,” the president stated.

Bets on Insider Information

Suspicious bets related to administrative decisions have surfaced previously. According to WSJ, after a series of well-timed bets concerning the Iran war, the White House circulated a memo warning employees against using non-public information for personal gain.

Instances of misconduct on Kalshi have also been identified before. In August, former White House teleprompter operator Gabriel Perez agreed to return $107,539 in profits and pay a $65,000 fine to settle CFTC claims, as he traded contracts on mentions in Trump’s speeches after reviewing them in advance. The CFTC noted that Kalshi assisted in the investigation.

A few days later, on August 31, the platform permanently banned former congressman George Santos and fined him over $71,000 for trades related to his attendance at the annual presidential address to Congress.

Kalshi is tightening its oversight as well. In June, the platform required traders to disclose their employment before trading on high-risk markets for insider information or manipulation.

The company stated that in the first quarter alone, it referred over 20 cases to law enforcement and initiated more than 150 internal investigations.

Legislators are also showing interest in the topic; in May, House Oversight Committee Chair James Comer launched an investigation into insider trading on Kalshi and Polymarket.

It is worth noting that in July, the CFTC prohibited Kalshi from canceling trades made by Michigan residents at the request of the state court.

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