The CFTC sent two regulatory proposals to the White House this Wednesday to solidify its exclusive authority over prediction markets. The agency specifically submitted the texts to the Office of Information and Regulatory Affairs (OIRA) to redefine the concept of a swap: a proposed rule that formally categorizes event contracts as financial derivatives, and an interim final rule that excludes casino-style gambling products.
This measure seeks to counter legal challenges from state regulators, such as those in New York, who have sued leading platforms like Polymarket and Kalshi, alleging they operate illegal gambling operations. By classifying these contracts under the federal designation of swaps, the agency led by Michael Selig aims to shield the industry under federal jurisdiction and protect it from the reach of state gaming laws, amid pending legal battles in federal appeals courts and the Supreme Court.
The initiative represents a pivotal step toward clarifying the regulatory framework for decentralized finance and event contracts. The next phase will involve White House review, subsequent public notice-and-comment periods, and the potential implementation of the interim rule.
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