The CFTC moves to make sports and election bets "swaps," taking its prediction-market fight with the states up a level

Washington's derivatives regulator is trying to settle the prediction-market fight by changing the definitions. The CFTC published a proposed rule on Friday that would expressly include event contracts, from sports games to elections, culture and the weather, in the definition of a "swap," the kind of derivative the agency oversees.

"These products are commodity derivatives squarely within the CFTC's regulatory remit," Chairman Michael Selig said in the agency's release. The public has 30 days to comment once the proposal appears in the Federal Register.

The timing is not an accident. States argue that sports contracts sold by platforms such as Kalshi and Polymarket are gambling and fall under their own laws. In September the 6th Circuit ruled that Kalshi's sports contracts are not swaps and that federal commodities law does not override state gambling rules, PYMNTS reported. The 8th Circuit also ruled against federal preemption, while the 3rd Circuit went the other way. That split makes a Supreme Court review more likely, and New York has separately sued Polymarket.

A new definition may not end the argument. The 6th Circuit said state gambling laws would still apply even if the contracts were swaps.

What to watch: the Federal Register date, which starts the 30-day comment clock, and whether the Supreme Court takes up the circuit split.