Key Points
- The CFTC submitted two rules to the White House on 28 September; one to classify event contracts as swaps and another to exclude casino-style gambling from that regulatory definition entirely.
- A unanimous Sixth Circuit panel ruled against Kalshi just three days before the filings reached the White House, issuing a decision that went further than most expected.
- Arche Capital’s Vanessa Grellet cautioned: “We need to wait until the Supreme Court ruling because it could supersede that rulemaking.”
Three days after a unanimous panel of the Court of Appeals issued Kalshi yet another notable blow, the CFTC struck. Two rules were forwarded to the Office of Information and Regulatory Affairs at the White House, which screens the regulations of the federal agencies before their issuance. They were forwarded on 28 September and await publication and implementation.
One of them, the proposed rule with RIN 3038-AF82, will expand the definition of a swap to encompass explicitly the event contracts. These are binary options-type products traded on exchanges such as Kalshi, Polymarket, Crypto.com and Robinhood. The other one, the interim final rule with RIN 3038-AF81, would remove the casino-like products from that regulatory definition. The procedural distinction between the two rules is important, as the former will require an extended period for public comment prior to implementation. However, the latter may go into effect immediately upon being published in the Federal Register.
The Court Loss That Triggered This Response
On 25 September, a unanimous panel of the US Court of Appeals for the Sixth Circuit ruled that Kalshi’s sports-event contracts are not swaps under federal law. The court found that sporting events lack the inherent financial, economic or commercial consequence the Commodity Exchange Act requires. The panel then issued a finding that went further than many had anticipated. Federal law, it held, would not pre-empt Ohio’s or Tennessee’s gambling statutes even if the contracts were swaps. That second holding is the one no new regulatory definition can reach, and the agency understands precisely where the gap lies.
Kalshi reportedly derives 95% of its revenue from sports contracts, a figure cited in legal proceedings by New Jersey’s Attorney General. For a company most recently valued at approximately $22 billion after its latest fundraising round, state-by-state enforcement running independent of federal oversight is not a compliance footnote. It is a direct challenge to a business model built on nationwide access to sports contracts.
One Rule Could Take Effect Without Public Comment
Interim final rules pose an element of legal risk that stands apart from the fundamental dispute over jurisdiction. Agencies are required to receive public comment before promulgating a regulation; this step is completely circumvented in interim final rules, a point that is examined carefully by the courts.
Gaming and sports-betting attorney Daniel Wallach identified the specific exposure in a post on X on 30 September: “If the interim rule goes beyond the title’s suggestion (e.g., excluding casino-style products) and provides tacit authorisation for sports-event contracts, it could prompt immediate APA litigation in federal court.”
The Sixth Circuit had already flagged this problem from a different angle. Accepting a swap definition broad enough to cover sports contracts, the court warned, would likely pull virtually every gambling product into that same category. The CFTC’s two-rule structure, classifying event contracts while carving casino products out, appears designed to answer that critique in advance. Whether the final language actually holds that line depends on text that has not yet been published.
A Five-Member Commission Running With One
What rarely surfaces in coverage of this dispute is who is actually driving all of it. The CFTC is built as a five-member commission. After Chairman Michael Selig’s confirmation, the last remaining commissioner resigned, leaving Selig as the body’s sole sitting member. Every state lawsuit, every amicus brief, and now both of these White House filings have moved forward on the authority of a single person.
When Semafor pressed Selig on whether he would keep pursuing states that challenge prediction markets, his answer left little room for ambiguity: “To the extent any state proposes a law that is illegal, essentially a law that conflicts with federal law, we have to take action.” The determination is clear. Whether rules advanced by a sole acting commissioner survive the procedural scrutiny that courts apply to major regulatory actions remains genuinely open.
The Commercial Stakes Driving the Fight
The figures tell you why both parties have remained committed to spending a lot on litigation. In the second quarter of 2026, Robinhood earned $156 million from its event contracts, which is more than what it got from trading in equities and cryptocurrencies in that same quarter. The amount is more than ten times what it earned in Q2 2025.
Traditional sportsbooks pay billions in state taxes and licensing fees each year. Prediction markets operate under a federal shield that those businesses cannot access. That commercial asymmetry explains the breadth of the opposition. At least 20 states, alongside tribal gaming interests and commercial casino operators, have taken legal action against prediction market platforms, according to New Jersey’s Attorney General. When Attorney General Jennifer Davenport filed New Jersey’s Supreme Court petition, she framed the charge plainly: “Companies like Kalshi claim to offer legal sports betting in all 50 states, but they refuse to follow the gambling laws of any state.”
Courts Are Already Ahead of the Agency
The Sixth and Ninth Circuits have both ruled that sports event contracts are not swaps. Only the Third Circuit sided with Kalshi, in April. New Jersey’s petition is now docketed at the Supreme Court as No. 26-299, with separate petitions from Crypto.com and Robinhood also pending before the justices. The CFTC is trying to write a regulatory answer to a question that two federal circuits have already answered against it, and a third is now waiting in Washington.
Arche Capital managing partner Vanessa Grellet, formerly of the New York Stock Exchange’s derivatives markets, told American Banker what many in the industry are thinking: “We need to wait until the Supreme Court ruling because it could supersede that rulemaking. In the meantime, we’ll have the CFTC framework. There could be a middle ground if there is a legislative proposal, but in the meantime a Supreme Court decision would be the most certain outcome.”
Expert Analysis: Two Rules, One Problem No Definition Can Fix
The CFTC’s dual-track approach is tactically coherent and strategically fragile at the same time. Anchoring event contracts to the regulatory swap definition gives the agency a stronger litigation position going into the next wave of state enforcement battles. The Sixth Circuit’s ruling, however, produced a finding that regulatory language simply cannot address. It held that even if Kalshi’s contracts qualified as swaps, federal commodities law would still not pre-empt state gambling statutes.
We think the sole-commissioner dynamic is the part of this story that has not received the scrutiny it deserves. A single unconfirmed official is unilaterally advancing regulatory definitions that determine who controls oversight of a multibillion-dollar industry, on the precise question where two of the three circuits to rule have already rejected his agency’s position. That is a remarkable concentration of authority in one person’s hands. It also creates exactly the kind of procedural vulnerability that legal opponents target first, exploiting the absence of proper commission deliberation to challenge a rule’s validity before it can take hold.
The new filings may strengthen the CFTC’s hand against states that have not yet litigated the question. They offer no answer to the courts that already have.
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