CFTC Proposes Rule Declaring Sports, Politics and Weather Event Contracts Are Swaps

The Commodity Futures Trading Commission on October 9, 2026 published a Notice of Proposed Rulemaking that would expressly treat event contracts, such as those tied to sports, politics, cultural and weather events, as swaps.

According to the release, the agency regards these contracts as financial instruments the trade already treats as swaps, and the proposal aims to clear up any uncertainty about their status.

The pre-publication text leaves the comment deadline as a placeholder keyed to the proposal’s publication in the Federal Register.

What the proposal would add

The proposal would add section 1.3 (Swap)(2)(i)(G) to the Commission’s regulations, providing that the term swap includes “[e]vent contracts, including those based on sports-, politics-, cultural-, and weather-related events.”

The Securities and Exchange Commission joins in proposing the rule in satisfaction of the joint-rulemaking requirement in section 712(d)(1) of the Dodd-Frank Act; the proposal does not address matters within the SEC’s jurisdiction.

“Americans use event contracts to hedge risks, speculate, and provide the public with information about the outcome of future events,” Chairman Michael S. Selig said in the announcement.

He also said the products are commodity derivatives that sit within the CFTC’s oversight under the Commodity Exchange Act and its exclusive jurisdiction.

The Commission’s legal rationale

The proposal argues event contracts qualify as swaps under multiple prongs of Commodity Exchange Act section 1a(47)(A): as instruments commonly known to the trade as swaps under prong (iv), as transactions whose payment depends on an occurrence or contingency tied to a potential financial, economic, or commercial result under prong (ii), and, for contracts structured as binary options, as options based on commodities under prong (i).

The Commission notes that events related to sports, politics, culture, and weather fall within the statute’s definition of an excluded commodity.

The proposal also invokes the Special Rule added by Dodd-Frank to the CEA, which lets the Commission prohibit swaps in excluded commodities involving gaming, terrorism, assassination, or war as contrary to the public interest.

The Commission argues the provision confirms that sports-related event contracts can be swaps within CFTC jurisdiction rather than exempting them, and that the Special Rule leaves it with power to bar gaming-related event contracts it deems contrary to the public interest.

It has separately proposed weighing price-discovery and hedging utility in those determinations, distinguishing contracts tied to overall performance across an extended stretch of play from contracts settling on a specific play, pitch, shot, or foul.

Court rulings and state actions behind the proposal

The proposal says recent state actions and court rulings undermine the CFTC’s jurisdiction over event contracts.

Minnesota enacted a criminal prohibition on operating or facilitating a prediction market.

Arizona prosecutors brought a twenty-count criminal information against a designated contract market over sports and election event contracts.

New York sought a temporary restraining order against a DCM headquartered in that state, and state trial courts directed the same DCM to geofence sports-related event contracts for users in Michigan, Washington, and Nevada.

Three federal appeals courts have split on the question.

In April 2026, a divided Third Circuit panel held that sports event contracts listed on a CFTC-licensed DCM are swaps under the CEA subject to the CFTC’s jurisdiction.

In August 2026, the Ninth Circuit adopted the opposite interpretation of section 1a(47)(A)(ii), concluding the sports event contracts at issue were likely not swaps.

In September 2026, a Sixth Circuit panel reached the same conclusion, holding that the underlying events need an inherent tie to a financial, economic, or commercial consequence.

The Commission says these rulings demonstrate widespread confusion and disuniformity about the swap definition, prompting the Commission to use its statutory power to further define the term.

Market context cited in the proposal

As of September 1, 2026, at least seven CFTC-registered DCMs offer sports-related event contracts to U.S. persons, and more than fifteen DCM applications filed since 2025 are pending.

Average monthly trading volume in event contracts across all DCMs reporting to the Commission totaled about $1.5 billion in August 2026, estimated from nonpublic daily trade and reporting data.

Of that volume, approximately $1.2 billion was in sports-related event contracts, approximately $11 million in politics-related event contracts including elections, and approximately $4 million in weather-related event contracts.

The proposal recounts the CFTC’s history with event contracts: a 1993 no-action letter to Iowa Electronic Markets allowing it to list contracts on U.S. and Canadian elections; the 2004 designation of HedgeStreet, renamed Nadex in 2009 and transitioned to the Crypto.com platform in 2025, as the first DCM dedicated to event contracts; a 2008 concept release; the 2010 approval of contracts on box-office receipts; and the 2022 order against Blockratize, doing business as Polymarket.com, finding that its event contracts constituted swaps under CFTC jurisdiction.

Scope limits and stated effects

The proposal does not reach event contracts structured as futures or instruments subject to SEC jurisdiction, nor would it extend to casino-style gambling products, which the Commission, in a separate Interim Final Rule, says are not swaps under its jurisdiction.

The classifications are for Commodity Exchange Act purposes only; federal tax treatment is determined under the Internal Revenue Code and applicable Treasury and IRS guidance.

The Commission preliminarily believes the proposal would not change market participants’ legal rights or obligations because its current practice already classifies event contracts as swaps.

It says the primary benefit would be added certainty and uniform nationwide treatment of event contracts as swaps subject to the CFTC’s exclusive jurisdiction, with negligible direct costs.

The Commission also notes possible harms.

It says the added certainty could be perceived by retail participants as a safety signal and raise risk appetite, and that certain characteristics of event-contract trading, including outcomes arriving at unpredictable intervals, a perceived element of skill, near-miss experiences, and the potential for chasing losses, can be associated with addictive potential and financial harm.

Written comments are due through Regulations.gov within 30 days after the NPRM appears in the Federal Register.

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