The Commodity Futures Trading Commission is moving to clarify whether prediction market contracts are financial products or gambling, sending two new rules to the White House for review.
The agency submitted both rules Monday, according to White House regulatory filings.
One would treat event contracts as swaps, putting them under federal derivatives law. The other would exclude "casino-style gambling products" from the swap definition.
The event-contract rule would first go through public comment. The casino-gambling rule could take effect much sooner.
The move comes three days after a federal appeals court rejected Kalshi's argument that its sports contracts are swaps, a type of derivative that federal law places under the CFTC's exclusive jurisdiction.
The fight matters for Robinhood Markets Inc.
Robinhood offers prediction-market contracts through federally regulated exchanges, putting the company in the middle of the same state-versus-federal fight now playing out around Kalshi.
Kalshi Just Lost This Argument
The Sixth Circuit ruled Friday that Kalshi's sports-event contracts do not qualify as swaps because the sporting events underneath them are not inherently financial or economic.
The court said interest rate changes naturally carry financial consequences. Sports results may affect broadcasters, sponsors or local businesses, but those downstream effects are not enough to make a contract on the event a swap.
The ruling affirmed Ohio's victory and lifted an injunction preventing Tennessee from enforcing its gambling laws, handing Kalshi another major legal setback.
The court went further, holding that even if Kalshi's contracts were swaps, federal commodities law would not preempt Ohio's or Tennessee's gambling laws, meaning a new swap definition alone may not settle the fight in those states.
Federal courts have split on the issue. The Third Circuit sided with Kalshi in New Jersey in April, while the Ninth and Sixth circuits have ruled against it.
Where Do Sports Fit?
CFTC Chairman Michael Selig has repeatedly argued that prediction markets, including the sports contracts at the center of Kalshi's state battles, fall under the agency's exclusive jurisdiction.
The unanswered question is how the new rules will put that position into law. The full text has not been published, leaving unclear how the CFTC will distinguish sports event contracts from the "casino-style gambling products" it wants excluded from the swap definition.
Kalshi and Benzinga have an existing data collaboration agreement.
