Rule2026-21376
Further Definition of “Swap” To Exclude Casino-Style Gambling Products
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 19, 2026
Effective
October 19, 2026
Issuing agencies
Commodity Futures Trading Commission
Abstract
The Commodity Futures Trading Commission ("Commission" or "CFTC") is adopting an interim final rule ("Interim Final Rule") to codify its longstanding position that casino-style gambling products, including wagers placed on sportsbooks and casino games, are excluded from the "swap" definition.
Full Text
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<title>Federal Register, Volume 91 Issue 200 (Monday, October 19, 2026)</title>
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[Federal Register Volume 91, Number 200 (Monday, October 19, 2026)]
[Rules and Regulations]
[Pages 65969-65979]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-21376]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 1
RIN 3038-AF81
Further Definition of ``Swap'' To Exclude Casino-Style Gambling
Products
AGENCY: Commodity Futures Trading Commission.
ACTION: Interim final rule; request for comments.
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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or
``CFTC'') is adopting an interim final rule (``Interim Final Rule'') to
codify its longstanding position that casino-style gambling products,
including wagers placed on sportsbooks and casino games, are excluded
from the ``swap'' definition.
DATES:
Effective Date: This interim final rule is effective October 19,
2026.
Request for comment: Comments must be received by November 18,
2026.
ADDRESSES: You may submit comments, specifically referencing ``Further
Definition of `Swap' to Exclude Casino-Style Gambling Products'' and
RIN 3038-AF81, by any of the following methods:
<bullet> <a href="http://Regulations.gov">Regulations.gov</a>: Go to <a href="https://www.regulations.gov">https://www.regulations.gov</a> and
press the ``Search'' button, then proceed as follows:
1. Under Refine Documents Results--check the box to ``Only show
documents open for comment'';
2. Under Agency--select ``See More'' and check the box for
``Commodity Futures Trading Commission,'' then press the Apply button;
3. Identify this proposal in the list of CFTC documents open for
comment, press the ``Comment'' button to open the submission form, and
follow the instructions on the form.
Alternatively, if you are viewing this proposal on
<a href="http://www.federalregister.gov">www.federalregister.gov</a>, click the ``Submit A Public Comment'' button
at the top of the page to open the comment form. Follow the
instructions on the form to submit your comment to <a href="http://Regulations.gov">Regulations.gov</a>.
<bullet> Mail: Send to--Christopher Kirkpatrick, Secretary of the
Commission, Commodity Futures Trading Commission, Three Lafayette
Centre, 1155 21st Street NW, Washington, DC 20581.
<bullet> Hand Delivery/Courier: Address to--CFTC Comment
Submission, Attn: Christopher Kirkpatrick, Secretary of the Commission,
Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st
Street NW, Washington, DC 20581.
Please submit your comments using only one of these methods. To
avoid possible delays with mail or in-person deliveries, submissions
through <a href="http://Regulations.gov">Regulations.gov</a> are encouraged.
All comments must be submitted in English or, if not, accompanied
by an English translation. Do not include in your comment text or
attachments any personal identifying information or business
information that you do not want published online. Comments (regardless
of submission method) will be published without review for, and without
removal of, any personal identifying information or information your
business may consider confidential.
If you wish to submit confidential information for the Commission's
consideration, please contact the CFTC personnel listed in this Notice
under
[[Page 65970]]
FOR FURTHER INFORMATION CONTACT before making any submission. Please
also carefully review the Commission's procedures in 17 CFR 145.9 for
requesting confidential treatment under the Freedom of Information Act
(FOIA) of information submitted to the Commission.
The CFTC reserves the right, but shall have no obligation, to
review, pre-screen, filter, or redact all or any part of your comment
submission. The CFTC also reserves the right, without further
notification, to refuse to publish or to remove from public view all or
any part of your submission to the extent it contains content
inappropriate for publication in a comment file, such as--without
limitation--obscene language, threats of violence, solicitations for
commercial sales or illegal activity, or obvious spam. If a submission
that is refused for or withdrawn from publication because of
inappropriate content also contains comments on the merits of this
proposal, such submission will be retained in the record for the matter
and will be considered as required under the Administrative Procedure
Act and other applicable laws, and may be accessible under the FOIA.
FOR FURTHER INFORMATION CONTACT: Tyler S. Badgley, General Counsel;
Aaron M. Levine, Deputy General Counsel for Regulation,
<a href="/cdn-cgi/l/email-protection#a8daddc4cdc5c9c3c1c6cfe8cbcedccb86cfc7de"><span class="__cf_email__" data-cfemail="8bf9fee7eee6eae0e2e5eccbe8edffe8a5ece4fd">[email protected]</span></a>, 202-418-5000, Office of the General Counsel,
Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st
Street NW, Washington, DC 20581.
SUPPLEMENTARY INFORMATION:
I. Background
Title VII of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (``Dodd-Frank Act'') established a comprehensive
regulatory framework for swaps.\1\ Section 712(d)(1) of the Dodd-Frank
Act provides that the Commission and the Securities and Exchange
Commission (``SEC''), in consultation with the Board of Governors of
the Federal Reserve System (the ``Federal Reserve Board''), shall
jointly further define, among other terms, the term ``swap.'' \2\
Pursuant to this requirement, in 2012, the Commission and the SEC, in
consultation with the Federal Reserve Board, issued a final rule
further defining the term ``swap'' and other terms.\3\ That rule
addressed, among other topics, the treatment of certain traditional,
non-derivatives products, agreements, contracts, and transactions that
they concluded Congress did not intend to be regulated as swaps or
security-based swaps, including insurance contracts and certain
commercial and consumer transactions.
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\1\ See Dodd-Frank Wall Street Reform and Consumer Protection
Act, Public Law 111-203, 124 Stat. 1376, 1641 (2010). The text of
the Dodd-Frank Act is available at <a href="http://www.cftc.gov/LawRegulation/OTCDERIVATIVES/index.htm">http://www.cftc.gov/LawRegulation/OTCDERIVATIVES/index.htm</a>.
\2\ Dodd-Frank Act sec. 712(d)(1), codified at 15 U.S.C.
8302(d)(1) (directing the CFTC and SEC to undertake joint rulemaking
on covered topics). The CFTC shares jurisdiction over mixed swaps
and security futures with the SEC, and the SEC has sole jurisdiction
over security-based swaps. See CEA sec. 1a(44), 7 U.S.C. 1a(44), and
secs. 3(a)(55) and 3(a)(68) of the Securities Exchange Act of 1934
(``Exchange Act''), 15 U.S.C. 78c(a)(55) and 78c(a)(68). The
Commission has consulted with the Federal Reserve Board by sharing
this Interim Final Rule.
\3\ Further Definition of ``Swap,'' ``Security-Based Swap,'' and
``Security-Based Swap Agreement''; Mixed Swaps; Security-Based Swap
Agreement Recordkeeping, 77 FR 48208 (Aug. 13, 2012) (``Further
Definition Release'').
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This Interim Final Rule arises in the context of the ongoing debate
regarding the scope of the Commission's jurisdiction under the
Commodity Exchange Act (``CEA''), particularly as it relates to event
contracts. The CFTC generally has found that many event contracts,
including those based on sports-related events, are covered by the
CEA's swap definition.\4\ The CEA contains six definitions of ``swap,''
at least four of which are applicable to event contracts.
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\4\ Event contracts might be structured as other instruments
such as futures contracts, which are excluded from the statutory
definition of ``swap.'' CEA sec. 1a(47)(B), 7 U.S.C. 1a(47)(B)
(providing ``exclusions'' from the definition of ``swap'' under the
CEA, including futures, options on futures, securities such as
options on securities and indexes of securities, security-based
swaps, and debt securities). Certain event contracts may be
security-based swaps or other instruments subject to the SEC's
jurisdiction. See 7 U.S.C. 1a(47)(B) (providing ``exclusions'' from
the definition of ``swap'' under the CEA, including for securities
such as security-based swaps, certain options, and debt securities);
see also, e.g., 15 U.S.C. 78c(a)(68)(A) (defining ``security-based
swap'' under the Exchange Act). This Interim Final Rule does not
further define the term ``security-based swap.''
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First, CEA section 1a(47)(A)(i) includes binary options and other
commodity options in the ``swap'' definition by including ``any
agreement, contract, or transaction . . . that is a put, call, cap,
floor, collar, or similar option of any kind that is for the purchase
or sale, or based on the value, of 1 or more interest or other rates,
currencies, commodities, securities, instruments of indebtedness,
indices, quantitative measures, or other financial or economic
interests or property of any kind.'' \5\
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\5\ 7 U.S.C. 1a(47)(A)(i). A binary option is thus a type of
swap which is an ``option whose payoff is either a fixed amount or
zero.'' See CFTC, Futures Glossary, available at <a href="https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/CFTCGlossary/index.htm#B">https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/CFTCGlossary/index.htm#B</a>.
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Second, CEA section 1a(47)(A)(ii) defines ``swap'' to include ``any
agreement, contract, or transaction . . . that provides for any
purchase, sale, payment, or delivery (other than a dividend on an
equity security) that is dependent on the occurrence, nonoccurrence, or
the extent of the occurrence of an event or contingency associated with
a potential financial, economic, or commercial consequence.'' \6\
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\6\ 7 U.S.C. 1a(47)(A)(ii). The broad nature of clause (ii) of
the swap definition is in keeping with the broad definition of the
term ``commodity'' in the CEA. For example, the 1974 amendments to
the CEA expanded the definition of the term ``commodity'' to
encompass ``all services, rights, and interests in which contracts
for future delivery are presently or in the future dealt in.'' See
CEA sec. 1a(9), 7 U.S.C. 1a(9) (defining ``commodity''). In 2000,
Congress reaffirmed the broad scope of the commodity definition in
adding the term ``excluded commodity'' to the CEA.
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Third, CEA section 1a(47)(A)(iv) includes in the ``swap''
definition ``an agreement, contract, or transaction that is, or in the
future becomes, commonly known to the trade as a swap.'' \7\
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\7\ 7 U.S.C. 1a(47)(A)(iv).
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Fourth, CEA section 1a(47)(A)(vi) makes clear that the ``swap''
definition includes ``any combination or permutation of, or option on,
any agreement, contract, or transaction described in any of clauses (i)
through (v)'' of CEA section 1a(47)(A).\8\
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\8\ 7 U.S.C. 1a(47)(A)(vi).
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In addition to the ``swap'' definitions provided by the statute,
the Dodd-Frank Act included several provisions that give the Commission
authority to further define ``swap.'' First, Dodd-Frank Act section
712(d)(2), 15 U.S.C. 8302(d)(1), directs the CFTC and SEC, in
consultation with the Federal Reserve Board, to ``further define'' the
term ``swap.'' \9\ Second, Dodd-Frank Act section 721(b), 15 U.S.C.
8321(a)(2), permits the CFTC to define any term included in an
amendment to the CEA in Subtitle A of the Wall Street Transparency and
Accountability Act of 2010, which includes the term ``swap.'' Third,
Dodd-Frank Act section 721(b), 15 U.S.C. 8321(b), directs the CFTC to
[[Page 65971]]
further define ``swap'' to include transactions and entities that have
been structured to evade Subtitle A.
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\9\ The CFTC and SEC, in consultation with the Federal Reserve
Board, first further defined ``swap'' in a 2012 joint rulemaking. 77
FR 48208. In that rulemaking, the CFTC and SEC noted that, while
``[t]he statutory definitions of the terms `swap' and `security-
based swap' are detailed and comprehensive, . . . the definitions
could be read to include certain types of agreements, contracts, and
transactions that previously have not been considered swaps or
security-based swaps, and nothing in the legislative history of the
Dodd-Frank Act appears to suggest that Congress intended such
agreements, contracts, or transactions to be regulated as swaps or
security-based swaps.'' The CFTC and SEC thus used their authority
``to further clarify the treatment under the definitions of certain
types of agreements, contracts, and transactions.'' Id. at 48211.
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In recent months, many have expressed concern that a natural,
plain-text interpretation of the ``swap'' definition would necessarily
encompass casino-style gambling products and, finding that consequence
untenable, have diverged from the plain text of the statute. For
example, the Sixth Circuit in KalshiEX LLC v. Schuler viewed sports
event contracts as legally indistinguishable from casino-style sports
wagers; and thus it expressed concern that, if sports event contracts
are swaps, any sports wager--including ``every sports wager placed in a
casino, on an online sports book, or between two friends at a bar''--
would need to ``take place on federal markets.'' \10\ Indeed, the Sixth
Circuit explained, a person would commit a felony by engaging in
gambling off a designated contract market (``DCM'').\11\ Thus, the
Sixth Circuit believed that its atextual interpretation of the ``swap''
definition would avoid ``attach[ing] criminal penalties to a
breathtaking amount of commonplace gambling activity.'' \12\
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\10\ KalshiEX LLC v. Schuler, No. 26-3196, 2026 WL 2884087, at
*14-15 (6th Cir. Sept. 25, 2026) (citation modified).
\11\ Id. at *14.
\12\ Id. (citation modified).
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The Ninth Circuit similarly reasoned in KalshiEX, LLC v. Assad that
sports event contracts and casino-style sports wagering are
indistinguishable, finding that the ``substance'' of the sports event
contracts at issue was ``sports gambling, regardless of whether [the
DCM] calls them swaps'' (and, by inference, regardless of whether the
CFTC regulates them as swaps).\13\ And because ``there is not a
difference under the CEA's swap definition between sports betting on
Kalshi and sports betting in Caesar's Sportsbook, then every person
placing a sports bet at Caesar's Sportsbook (or anywhere else for that
matter) is violating the CEA.'' \14\ The court also expressed concern
that ``bingo games and pingpong matches'' would fall under CFTC
jurisdiction.\15\ For these and other reasons involving the court's
understanding of the CEA's ``context'' and ``history,'' \16\ the court
ultimately ``conclude[d] that these sports event contracts are likely
not swaps under the CEA.'' \17\
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\13\ KalshiEX, LLC v. Assad, No. 25-7516, 2026 WL 2543846, at
*10 (9th Cir. Aug. 28, 2026).
\14\ Id. at *11.
\15\ Id.
\16\ Id. at 9 (citation omitted).
\17\ Id. at 15.
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Exploiting this lack of clarity, certain States have asserted that
event contracts traded or executed on a DCM should be State regulated
(rather than federally regulated under the CEA). These States argue
that if the Commission has jurisdiction over event contracts, that
would necessarily subject casino-style sports wagers--traditionally
regulated by the States--to the Commission's jurisdiction as well. For
example, in response to a Commission proposed rulemaking, 40 States and
the District of Columbia submitted a comment, arguing that sports event
contracts are ``indistinguishable from traditional sports betting.''
\18\ The State of New Jersey recently argued to the United States
Supreme Court that ``[n]othing in the [CEA] gives the CFTC
unprecedented authority to become the sole regulator of sports gambling
in this country.'' \19\ And the Commonwealth of Kentucky has claimed
that determining that event contracts are swaps under the CEA amounts
to ``[t]ransferring every ounce of authority over sports wagering from
the States to the CFTC.'' \20\
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\18\ Letter from Dave Yost, et al. to Michael Selig at 1 (Apr.
30, 2026); <a href="https://comments.cftc.gov/PublicComments/ViewComment.aspx?id=115653&SearchText=yost">https://comments.cftc.gov/PublicComments/ViewComment.aspx?id=115653&SearchText=yost</a>.
\19\ Brief for Petitioner, Flaherty v. KalshiEX, LLC, No. 26-299
(Sept. 2, 2026), 2026 WL 2658173, at *32.
\20\ Memorandum of Law in Support of Motion to Dismiss or, in
the Alternative, for Summary Judgment at 24, United States v.
Kentucky, No. 3:26-cv-49 (E.D. Ky. Aug. 24, 2026).
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There also appears to be confusion within the gaming industry. The
American Gaming Association has argued that if ``sports wagers qualify
as `swaps,' the CEA would require all sports bets--including those
placed on the Las Vegas Strip--to be traded on DCMs.'' \21\ In its
view, there is ``no plausible statutory basis to distinguish retail
sports bets from identical wagers placed on [a DCM]--if the latter are
swaps, the former must be as well.'' \22\
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\21\ Brief of Amicus Curiae American Gaming Association in
Support of Defendants-Appellees and Affirmance, Schuler, Dkt. No. 54
at 23 (6th Cir. June 11, 2026).
\22\ Id. at 23-24.
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As the above discussion demonstrates, there is widespread confusion
regarding whether the definition of a swap includes casino-style
gambling products, including wagers placed on sportsbooks and casino
games, traditionally regulated at the State level. In this regard, many
courts, States, and private businesses are currently operating under
the erroneous premise that if event contracts are swaps, then casino-
style gambling products must also be swaps subject to CFTC
jurisdiction. That premise has led courts and States to deviate from
the plain text of the ``swap'' definition and impose atextual
limitations on the concept of an ``event'' that is ``associated with a
potential financial, economic, or commercial consequence.'' \23\
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\23\ Schuler, 2026 WL 2884087, at *11 (holding that ``the event
[must] be one inherently associated with a `financial, economic, or
commercial consequence' '' (emphasis added)).
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To address this misunderstanding, this Interim Final Rule affirms
and codifies the Commission's longstanding position that casino-style
gambling products, including sports-wagering contracts entered into on
a sportsbook and casino games, are not swaps and do not fall within the
CFTC's jurisdiction. This action is intended to remove regulatory
ambiguity and clarify the boundaries between the Commission's
jurisdiction over the derivatives markets and State and Tribal
jurisdiction over casino-style gambling.
The Commission notes that this approach is supported by a decision
of the United States Court of Appeals for the Third Circuit in
KalshiEX, LLC v. Flaherty, which held that ``sports-related event
contracts are traded on a CFTC-licensed DCM and depend on event
outcomes associated with economic consequences'' and therefore ``fit
within the Act's definition of `swaps' subject to the CFTC's
jurisdiction.'' \24\ In response to the State's concern that ``anything
from bingo games to pingpong matches will fall under the CFTC's
jurisdiction,'' the court observed that ''[i]n such far-fetched
scenarios, Congress's express delegation to the CTFC and the Securities
and Exchange Commission to `further define' swaps would prove useful,''
and it cited the Commission's 2012 rulemaking excluding insurance
contracts and consumer transactions.\25\ Other courts have similarly
recognized that the CEA applies to sports event contracts that ``take[
] the form of swaps,'' even while the CEA ``does not federalize all
gambling, or even all sports gambling.'' \26\ This Interim Final Rule
implements the Third Circuit's suggested approach.
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\24\ KalshiEX, LLC v. Flaherty, 172 F.4th 220, 228 (3d Cir.
2026).
\25\ Id.
\26\ Coinbase Fin. Mkts., Inc. v. Raoul, Nos. 1:25-cv-15406,
1:26-cv-03659, 1:26-cv-07363, 2026 WL 2969682, at *10 (N.D. Ill.
Oct. 2, 2026).
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Statutory Authority
Section 712(d)(1) of the Dodd-Frank Act provides that the
Commission and the SEC, in consultation with the Federal Reserve Board,
``shall further define,'' among other terms, the term
[[Page 65972]]
``swap.'' \27\ Section 712(d)(2)(A) further empowers the Commission and
the SEC, in consultation with the Federal Reserve Board, to ``jointly
adopt such other rules regarding such definitions as the [CFTC and SEC]
determine are necessary and appropriate, in the public interest, and
for the protection of investors.'' \28\
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\27\ Dodd-Frank Act sec. 712(d)(1), codified at 15 U.S.C.
8302(d)(1) (directing the CFTC and SEC to undertake joint rulemaking
on covered topics). This release adopts a rule of the CFTC that
addresses matters within the exclusive jurisdiction of the CFTC. The
SEC joins in adopting this rule in satisfaction of the statutory
requirement in Section 712(d)(1). The Interim Final Rule does not
address or otherwise relate to matters within the jurisdiction of
the SEC.
\28\ Dodd-Frank Act sec. 712(d)(2)(A), codified at 15 U.S.C.
8302(d)(2)(A).
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II. Interim Final Rule
The Commission is issuing this Interim Final Rule to further define
the term ``swap'' to explicitly exclude casino-style gambling products,
including sports-wagering contracts entered into on a sportsbook, from
the swap definition. By enacting this Interim Final Rule, the
Commission seeks to reiterate its longstanding position that its
oversight of federally regulated derivatives markets does not intrude
upon the traditional State and Tribal regulation of casino-style
gambling products.
Though Congress deliberately drafted a broad definition of a
swap,\29\ the CFTC's jurisdiction is not boundless. The Commission has
always acknowledged that certain instruments may, on their face,
plausibly fit within the definition of ``swap'' in CEA section 1a(47),
but that the swap definition is best read to exclude that instrument in
light of statutory context and a longstanding tradition of regulation
by another regulator. Gambling products offered by State or Tribe-
licensed casino operators and sportsbooks fit this mold.
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\29\ CEA sec. 1a(47), 7 U.S.C. 1a(47).
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Insurance serves as a prime precedent.\30\ On its face, prong (ii)
of the ``swap'' definition could plausibly be read to encompass
insurance contracts, because they make ``payment'' ``dependent on the
occurrence, nonoccurrence, or the extent of the occurrence of an event
or contingency associated with a potential financial, economic, or
commercial consequence.'' \31\ Given that potential ambiguity, when the
Commission and the SEC jointly further defined the term ``swap'' in
2012, the agencies explicitly noted that they did not interpret prong
(ii) of the swap definition \32\ ``to mean that products historically
regulated as insurance products should be included.'' \33\ The
Commission and the SEC further emphasized that nothing in the Dodd-
Frank Act ``suggest[ed] that Congress intended for traditional
insurance products to be regulated as swaps.'' \34\
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\30\ See Further Definition Release, 77 FR at 48210, 48212-25.
\31\ 7 U.S.C. 1a(47)(A)(ii).
\32\ As described above, CEA section 1a(47)(A)(ii) defines
``swap'' to include ``any agreement, contract, or transaction . . .
that provides for any purchase, sale, payment, or delivery (other
than a dividend on an equity security) that is dependent on the
occurrence, nonoccurrence, or the extent of the occurrence of an
event or contingency associated with a potential financial,
economic, or commercial consequence.'' 7 U.S.C. 1a(47)(A)(ii).
\33\ 77 FR at 48212.
\34\ Id.
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Consequently, the Commission and the SEC specifically carved out
traditional insurance products from the swap definition by relying on
core factual and structural differences to distinguish them from
derivatives. A foundational distinction was whether the instrument is
traded: the Commission and the SEC noted that ``insurance products
traditionally have not been entered into on or subject to the rules of
an organized exchange nor traded in secondary market transactions
(i.e., they are not traded on an organized market or over the
counter),'' whereas swaps are routinely traded on such venues.\35\
Furthermore, the Commission and SEC emphasized that ``all or part of
swaps and security-based swaps are novated or assigned to third
parties, usually pursuant to industry standard terms and documents.''
In other words, swaps can be centrally cleared, unlike insurance
contracts.\36\
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\35\ Id. at 48214; see also 17 CFR 1.3 (Swap)(4).
\36\ 77 FR at 48208, 48214.
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The Commission and the SEC also relied on the fact that insurance
products are ``provided by a person that is subject to supervision by
the insurance commissioner (or similar official or agency) of any state
or by the United States'' and are ``regulated as insurance under
applicable state law or the laws of the United States.'' \37\ The
agencies clarified, however, that other instruments providing
substantially similar economic exposure to an insurance contract--such
as certain credit default swaps--remain within the swap definition and
subject to the CFTC's jurisdiction.\38\
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\37\ 77 FR at 48220.
\38\ Id. (comparing insurance products and credit default
swaps). In this regard, the Commission and the SEC noted their
``concern[ ] that certain agreements, contracts, or transactions
that are swaps or security-based swaps might be characterized as
insurance products to evade the regulatory regime under Title VII of
the Dodd-Frank Act.'' Id.
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The Commission and the SEC took a similar approach to ``consumer
and commercial agreements that historically have not been considered
swaps or security-based swaps'' but nonetheless ``may have attributes
that could be viewed as falling within the swap or security-based swap
definition.'' \39\ Examples included ``acquisitions or sales of
property (tangible and intangible), provisions of services, employment
of individuals, and other matters that could be viewed as falling
within the definitions.'' \40\ The Commission and the SEC excluded
these contracts on the ground that they did ``not believe Congress
intended to include these types of customary consumer and commercial
agreements, contracts, or transactions in the swap or security-based
swap definition,'' again highlighting the ``key'' point that such
transactions are ``not traded on an organized market or over-the-
counter.'' \41\ The Commissions adopted this interpretation to address,
among other concerns, the possibility that customary consumer and
commercial agreements, contracts, or transactions could be subject to
the restriction in section 2(e) of the CEA on entering into swaps with
persons who are not eligible contract participants (``ECPs'') other
than on, or subject to the rules of, a DCM.
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\39\ Id. at 48246.
\40\ Id.
\41\ Id. at 48246-48.
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As explained in Part I, similar concerns have recently arisen in
connection with traditional gambling products offered by State-
regulated gambling companies and tribes. To address this concern, the
Commission seeks to further clarify through this Interim Final Rule
that casino-style gambling products are not within Commission's
jurisdiction. As explained below, the same concerns that led the
Commission to exclude insurance contracts and consumer and commercial
agreements from the ``swap'' definition are equally applicable to
gambling products.
First, and most fundamentally, gambling products do not bear the
structural characteristics of a CEA-regulated derivative. Gambling
products are typically conducted as bilateral transactions between a
casino or bookkeeper (a ``house'') and its customer rather than on an
organized market.\42\ Prices are not set by market forces and are not
subject to negotiation; rather, customers must accept the price
[[Page 65973]]
set by the house. Because of these dynamics, gambling products are not
inherently tradable, which is a strong indicator that these products
are not swaps or any other kind of derivative within the Commission's
jurisdiction.\43\
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\42\ Steven D. Levitt, Why Are Gambling Markets Organised So
Differently from Financial Markets?, 114 Econ. J. 223, 223 (2004).
\43\ While this Interim Final Rule addresses only casino-style
gambling products offered pursuant to State or Tribal law, the
exclusion provided herin is non-exclusive. There may be other
gambling-style transactions that are not swaps given how those
transactions are structured and whether they are tradable. Examples
could include a casual bet between friends or a casino-style
sportsbook illegally operating in a State that prohibits gambling.
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Tradability is a material consideration in determining whether a
financial instrument has the legal status of a derivative, as the
Commission and SEC emphasized with respect to insurance contracts and
consumer transactions. Although the CEA's ``swap'' definition does not
itself contain a tradability requirement, interpreters of statutory
text nonetheless must be guided by ``[t]he broader context provided by
other sections of the statute.'' \44\ The CEA's broader context
repeatedly reinforces tradability as an important consideration in
whether a particular contract qualifies as a swap.\45\ For example, CEA
section 2(e) makes it unlawful for any person, other than an ECP, to
enter into a swap unless executed on, or subject to the rules of, a
DCM.\46\
---------------------------------------------------------------------------
\44\ Robinson v. Shell Oil Co., 519 U.S. 337, 345 (1997).
\45\ Notably, courts have looked to the tradability of an
instrument to determine whether it is a future or a forward
contract. See, e.g., CFTC v. Zelener, 373 F.3d 861, 865-66 (7th Cir.
2004).
\46\ 7 U.S.C. 2(e).
---------------------------------------------------------------------------
Likewise, section 2(a)(1) of the CEA confers exclusive jurisdiction
on the CFTC with respect to ``accounts, agreements . . . , and
transactions involving swaps or contracts of sale of a commodity for
future delivery,'' to the extent they are ``traded or executed on a
[DCM] or a swap execution facility.'' \47\ Furthermore, the CEA
provides that the transactions subject to the Commission's exclusive
jurisdiction serve a ``national public interest by providing a means
for managing and assuming price risks, discovering prices, or
disseminating pricing information through trading in liquid, fair and
financially secure trading facilities.'' \48\ Only tradable
instruments--i.e., those that are executed multilaterally or at least
subject to negotiation--can serve those purposes.
---------------------------------------------------------------------------
\47\ 7 U.S.C. 2(a)(1)(A).
\48\ 7 U.S.C. 5(a).
---------------------------------------------------------------------------
The CEA's Core Principles also presuppose that derivatives are
tradable instruments. Core Principle 9 for DCMs requires exchanges to
provide ``a competitive, open, and efficient market and mechanism for
executing transactions that protects the price discovery process of
trading in the centralized market.'' \49\ Gambling products are not
offered through ``trading'' on ``centralized market[s],'' and prices
for gambling products are not set by ``a competitive, open, and
efficient market''--they are unilaterally dictated by the casino or
sportsbook. Other Core Principles for DCMs and swap execution
facilities (``SEFs'') likewise presuppose the competitive trading of
derivatives, which cannot be said of gambling products.\50\ For these
reasons, gambling products are not derivatives subject to its
jurisdiction.
---------------------------------------------------------------------------
\49\ 7 U.S.C. 7(d)(9).
\50\ E.g., 7 U.S.C. 7(d)(7) (requiring the offeror of a
derivative to have an ``electronic matching platform'' or ``trade
execution facility''), 7(d)(8) (requiring daily publication of price
and volume information ``for actively traded contracts''), 7b-
3(f)(4) (requiring SEFs to ``monitor trading in swaps'').
---------------------------------------------------------------------------
Second, the CEA contemplates that a swap can be cleared. Section
2(h) of the CEA provides that ``[i]t shall be unlawful for any person
to engage in a swap unless that person submits such swap for clearing
to a derivatives clearing organization that is registered under this
chapter or a derivatives clearing organization that is exempt from
registration under this chapter if the swap is required to be
cleared.'' \51\ Like insurance contracts, gambling products are not
``cleared,'' in that the wager obligation is not routinely transferred
to a third party to eliminate counterparty credit risk and ensure
contract fulfillment.
---------------------------------------------------------------------------
\51\ 7 U.S.C. 2(h).
---------------------------------------------------------------------------
Third, there is no indication that ``Congress intended to include
[gambling products] in the swap . . . definition.'' \52\ To the
contrary, Congress has long recognized a distinction between gambling
products and derivatives contracts.\53\ Furthermore, when Congress
adopted the ``swap'' definition, it did so against a background of
other federal statutory provisions regulating sports gambling, and the
Commission does not presume Congress to have impliedly repealed those
provisions.\54\
---------------------------------------------------------------------------
\52\ 77 FR at 48246.
\53\ 7 U.S.C. 16(e)(2) (preempting ``any State or local law that
prohibits or regulates gaming . . . in the case of'' certain
``excluded'' or ``exempted'' contracts); 31 U.S.C. 5362(1)(E)
(distinguishing a ``bet or wager'' from ``any transaction conducted
on or subject to the rules of a registered entity or exempt board of
trade under the Commodity Exchange Act'').
\54\ 18 U.S.C. 1084(a) (``Whoever being engaged in the business
of betting or wagering knowingly uses a wire communication facility
for the transmission in interstate or foreign commerce of bets or
wagers or information assisting in the placing of bets or wagers on
any sporting event or contest, or for the transmission of a wire
communication which entitles the recipient to receive money or
credit as a result of bets or wagers, or for information assisting
in the placing of bets or wagers, shall be fined under this title or
imprisoned not more than two years, or both.''); 28 U.S.C. 3702(1)
(``It shall be unlawful for--(1) a governmental entity to sponsor,
operate, advertise, promote, license, or authorize by law or
compact, or (2) a person to sponsor, operate, advertise, or promote,
pursuant to the law or compact of a governmental entity, a lottery,
sweepstakes, or other betting, gambling, or wagering scheme based,
directly or indirectly (through the use of geographical references
or otherwise), on one or more competitive games in which amateur or
professional athletes participate, or are intended to participate,
or on one or more performances of such athletes in such games.''),
held unconstitutional in Murphy v. National Collegiate Athletic
Ass'n, 584 U.S. 453 (2018).
---------------------------------------------------------------------------
Fourth, just as insurance products and consumer transactions have
traditionally been subject to a distinct regulatory framework governed
by State law, casino-style gambling products have historically been,
and are, offered by State-licensed gambling venues or Tribes, and
subject to a gambling-specific regulatory regime. Absent a more
specific indication in the statutory text, the Commission does not
presume that Congress intended to disrupt that federal-state
balance.\55\
---------------------------------------------------------------------------
\55\ See Bond v. United States, 572 U.S. 844, 863 (2014).
---------------------------------------------------------------------------
Fifth, the ``swap'' definition also encompasses any ``agreement,
contract, or transaction that is, or in the future becomes, commonly
known to the trade as a swap.'' \56\ The Commission is unaware of any
trade usage or market belief that gambling products are considered
swaps in the derivatives industry. To the contrary, DCMs and industry
groups have repeatedly emphasized to federal courts that gambling
contracts are not swaps.\57\
---------------------------------------------------------------------------
\56\ 7 U.S.C. 1a(47)(A)(iv).
\57\ Opening Brief for Appellant KalshiEX LLC, Schuler, Dkt. No.
28 at 51 (6th Cir. May 5, 2026) (``[T]hat Kalshi's sports-event
contracts are swaps does not mean that run-of-the-mill sports bets
are also swaps.''); Appellant's Opening Brief, QCX LLC v. Nessel,
No. 26-1552, Dkt. No. 15 at 12 (6th Cir. Aug. 17, 2026) (``Sports-
related event contracts are fundamentally different than sportsbook
bets.''); Brief of Amicus Curiae the Coalition for Prediction
Markets in Support of Plaintiff-Appellee and Affirmance, KalshiEX
LLC v. Orgel, No. 26-5235 at 17-22 (6th Cir. June 24, 2026)
(explaining legally significant distinctions between event contracts
and gambling).
---------------------------------------------------------------------------
Event contracts differ from gambling products in all five respects.
First, unlike gambling products, event contracts have the essential
structural characteristics of a derivatives contract. By design, they
are traded on CFTC-registered national exchanges at market-set prices
through the interaction of bids or offers placed on a central
orderbook, not at prices unilaterally dictated by a ``house.'' The
exchanges are neutral;
[[Page 65974]]
they do not profit when the event contract settles one way versus
another. Rather, they earn profit by charging transaction fees when a
trade occurs, similar to any other derivatives trade.\58\ Such
contracts are subject to the comprehensive DCM and derivatives clearing
organization (``DCO'') Core Principles that serve to, among other
things, protect customers who are trading and clearing such contracts.
The structure of gambling wagers and event contracts is materially
different, and therefore subject to different regulatory regimes.\59\
---------------------------------------------------------------------------
\58\ The CFTC recently issued a letter to Commission-regulated
entities to remind those entities of their obligation to display
prices clearly and not to mislead customers into mistaking market-
priced products with casino-style products. CFTC, Misleading or
Deceptive Practices (Aug. 7, 2026), available at <a href="https://www.cftc.gov/PressRoom/PressReleases/9278-26">https://www.cftc.gov/PressRoom/PressReleases/9278-26</a>.
\59\ Additionally, while a sportsbook or other gambling venue
may regularly exclude winners, a DCM is subject to an impartial
access requirement that does not allow it to bar traders who have
profited. See 17 CFR 38.151.
---------------------------------------------------------------------------
Second, event contracts traded on a DCM are centrally cleared by
CFTC-registered clearinghouses to eliminate counterparty credit risk,
just like other derivatives transactions. Thus, when a bid and offer
match on a DCM's central orderbook, the parties enter into a contract
with one another, but that contract is then novated such that each
party has a contractual relationship with a neutral, creditworthy
clearinghouse.
Third, there is strong textual evidence that Congress intended for
event contracts to be considered ``swaps'' under the CEA and to give
the Commission authority to regulate them. The second prong of the
``swap'' definition is the most obvious illustration, as it
specifically covers ``contract[s]'' based on ``event[s].'' \60\
Additionally, when Congress created the ``swap'' definition, it also
enacted a ``Special rule for review and approval of event contracts and
swaps contracts.'' \61\ The Special Rule recognizes that ``swaps in
excluded commodities'' can be ``based upon the occurrence, extent of an
occurrence, or contingency'' that ``involve[s],'' among other things,
``gaming.'' \62\ The word `` `gaming,' as used in the special rule,
refers to playing games,'' so ``event contracts related to . . .
sporting events . . . could implicate the gaming category.'' \63\
Congress expressly gave the Commission jurisdiction over those
contracts, confirming their status as derivatives contracts.\64\
Notably, Congress did not give the Commission authority over ``gaming''
products themselves, further confirming that gaming products like
wagers fall outside the Commission's jurisdiction but event contracts
that involve games are within the Commission's jurisdiction.\65\
---------------------------------------------------------------------------
\60\ 7 U.S.C. 1a(47)(A)(ii).
\61\ 7 U.S.C. 7a-2(c)(5)(C) (emphasis added).
\62\ 7 U.S.C. 7a-2(c)(5)(C)(i).
\63\ KalshiEX LLC v. CFTC, 2024 WL 4164694, at *10 (D.D.C. Sept.
12, 2024).
\64\ 7 U.S.C. 7a-2(c)(5)(C)(ii).
\65\ KalshiEX, 2024 WL 4164694, at *12 (rejecting interpretation
of Special Rule that would give CFTC jurisdiction over any contract
that ``states define . . . as `gambling' '').
---------------------------------------------------------------------------
The Sixth Circuit expressed the view that ``just because the CFTC
may prohibit gaming-related event contracts does not mean [a DCM's]
sports-event contracts are necessarily swaps,'' since event contracts
can also be ``agreements, contracts, [or] transactions'' under the
Special Rule.\66\ But apart from ``gaming,'' the Special Rule only
applies to event contracts that ``involve'' ``activity that is unlawful
under any Federal or State law,'' ``terrorism,'' ``assassination,''
``war'', or ``other similar activity determined by the Commission, by
rule or regulation, to be contrary to the public interest.'' \67\ It
must be the case that a ``swap'' can ``involve'' at least one of these
categories of activity, or else the word ``swap'' in the Special Rule
is surplusage. Furthermore, even if a ``gaming'' contract is considered
an ``agreement,'' ``contract,'' or ``transaction,'' the Special Rule
still classifies that contract as being ``in excluded commodities.''
\68\ And the swap definition covers binary options in excluded
commodities which, as discussed below, includes event contracts.\69\ In
short, the Special Rule contemplates that ``gam[es]'' are ``excluded
commodities,'' which reinforces that event contracts based on games are
derivatives.
---------------------------------------------------------------------------
\66\ Schuler, 2026 WL 2884087, at *15.
\67\ 7 U.S.C. 7a-2(c)(5)(C)(i)(I)-(IV), (VI).
\68\ Id.
\69\ Id. 1a(47)(A)(i).
---------------------------------------------------------------------------
Fourth, event contracts have traditionally been regulated by the
Commission, not the States. ``Since 1992, Commission-regulated
exchanges have listed for trading a variety of commodity futures and
options contracts with payout terms based on'' events ``as diverse as
regional insured property losses, the count of bankruptcies,
temperature volatilities, corporate mergers, and corporate credit
events''; and, in subsequent years, event contracts encompassed ``the
accomplishment of certain scientific advances, world population levels,
the adoption of particular pieces of legislation,'' and even ``the
length of celebrity marriages.'' \70\ In 1993, the Commission issued a
no-action letter to Iowa Electronic Markets, allowing the facility to
list event contracts tied to U.S. and Canadian elections.\71\ In 2004,
the CFTC designated the first DCM dedicated to listing contracts based
on events that are excluded commodities.\72\ Initially, these contracts
were structured as commodity options known as ``binary options,'' the
cash settlement of which was based on whether a specified event had
occurred.\73\ Thus, while gambling is traditionally State-regulated,
event contracts are traditionally federally regulated.
---------------------------------------------------------------------------
\70\ Concept Release on the Appropriate Regulatory Treatment of
Event Contracts, 73 FR 25669, 25670-71 (May 7, 2008).
\71\ CFTC Staff Letter No. 93-66 (June 18, 1993), available at
<a href="https://www.cftc.gov/sites/default/files/idc/groups/public/@lrlettergeneral/documents/letter/93-66.pdf">https://www.cftc.gov/sites/default/files/idc/groups/public/@lrlettergeneral/documents/letter/93-66.pdf</a>.
\72\ See CFTC Release No. 4894-04, CFTC Designates HedgeStreet
as a Contract Market and as a Registered Clearing Organization (Feb.
20, 2004), and the related DCM Order of Designation for HedgeStreet,
Inc. (Feb. 18, 2004), available at <a href="https://www.cftc.gov/sites/default/files/opa/press04/opa4894-04.htm">https://www.cftc.gov/sites/default/files/opa/press04/opa4894-04.htm</a>. In 2009, HedgeStreet
changed its name to North American Derivatives Exchange, Inc., or
Nadex, and in 2025, Nadex transitioned to the <a href="http://Crypto.com">Crypto.com</a> platform.
See summary of registration, available at <a href="https://www.cftc.gov/IndustryOversight/IndustryFilings/TradingOrganizations/34536">https://www.cftc.gov/IndustryOversight/IndustryFilings/TradingOrganizations/34536</a>. It
continues to list contracts on foreign exchange, equity indices,
commodity prices, and digital assets.
\73\ See e.g., Letter from HedgeStreet, Inc. to David Stawick,
Sec'y, CFTC, Re: Rule Certification: HedgeStreet's listing of new
Germany 30 Binary Hedgelet Contracts (Oct. 30, 2008), available at
<a href="https://www.cftc.gov/sites/default/files/stellent/groups/public/@rulesandproducts/documents/ifdocs/rul103008hedgestreet001.pdf">https://www.cftc.gov/sites/default/files/stellent/groups/public/@rulesandproducts/documents/ifdocs/rul103008hedgestreet001.pdf</a>.
---------------------------------------------------------------------------
Fifth, as set forth in the separate Notice of Proposed Rulemaking
published on the same day as this Interim Final Rule proposing to
further define ``swap'' to include event contracts, the Commission
preliminarily believes that event contracts are known to the trade as
``swaps.'' Therefore, if certain event contracts do not qualify as
swaps under the first or second prongs of the swap definition, they do
qualify under the fourth prong. The same cannot be said of gambling
products, for the reasons noted above.
In sum, the ``swap'' definition generally should not apply where a
product has a longstanding history of being subject to a distinct
regulatory framework and structurally does not lend itself to the
requirements of the CEA, including its exchange-trading requirement and
the Core Principles. As the Commission and SEC recognized in 2012,
insurance contracts and consumer and commercial agreements are such
examples. Today, the Commission clarifies that casino-style gambling
[[Page 65975]]
products offered by casinos or sportsbooks likewise fit the exclusion.
The Commission acknowledges that a person can achieve similar
economic exposure by either entering into a gambling wager or
purchasing an event contract. However, that does not make the two
products one and the same, nor does it require that the two be subject
to identical regulatory frameworks. Indeed, there are many instances in
which a person can achieve the same (or similar) economic exposure via
structurally different products subject to distinct regulatory regimes.
For example, as noted, insurance and credit default swaps can provide
similar risk mitigation, but that does not mean the two are or must be
regulated the same way. Likewise, a person can gain exposure to a
crypto asset by purchasing the crypto asset itself, purchasing shares
in a firm that holds the crypto asset, or by purchasing crypto asset
futures, each of which has distinct regulatory consequences. The same
is true in the context of event contracts and casino-style gambling
products.
Based on this interpretation and to address the concerns referenced
in Part I above, the Commission is adopting this Interim Final Rule to
establish an exclusion confirming that traditional gambling products do
not qualify as swaps under the CEA. Nothing herein implies or presumes
that an agreement, contract, or transaction that does not meet any of
the requirements of this exclusion is a swap. Such an agreement,
contract, or transaction will require further analysis of the
applicable facts and circumstances, including the form and substance of
such agreement, contract, or transaction, to determine whether it is a
gambling product, and thus not a swap.
Similar to the exclusions for insurance contracts and consumer
transactions, the exclusion has two components: a test relating to the
status of the party offering the agreement, contract, or transaction
(the ``Provider Test'') and a test relating to the terms of the
agreement, contract, or transaction (the ``Product Test'').
To satisfy the Provider Test, the relevant agreement, contract, or
transaction must be provided by a person that is subject to supervision
by the gaming commissioner (or similar official or agency) of any State
or by a Tribe, and such agreement, contract, or transaction is
regulated as gaming or gambling under applicable State or Tribal
law.\74\ This requirement ensures that the Commission does not have
jurisdiction over persons or products that have traditionally been the
subject of State or Tribal regulation, particularly given the absence
of an indication in Dodd-Frank that Congress intended the Commission to
regulate these persons and transactions.
---------------------------------------------------------------------------
\74\ The insurance exclusion is similarly limited (outside of
the contexts of reinsurance and non-admitted insurance) to products
offered by a person that is subject to supervision by the insurance
commissioner (or similar official or agency) of any State or by the
United States and requires that the agreement, contract, or
transaction also must be regulated as insurance under applicable
State law or the laws of the United States. See 77 FR at 48220. The
consumer-transaction exclusion likewise contains limitations to
agreements, contracts, and transactions entered into by consumers or
commercial or non-profit entities for specified purposes. See id. at
48247.
---------------------------------------------------------------------------
To satisfy the Product Test, the agreement, contract, or
transaction must not be traded on a board of trade, an organized
exchange, a swap execution facility, or any other market in which
trades are executed multilaterally or subject to individual
negotiation. For example, bets or wagers offered by a sports book or
casino as principal to its customers, where the material terms of those
bets or wagers are governed by standard ``house rules'' or similar
standard terms, would satisfy the Product Test. In contrast, an
agreement, contract, or transaction entered into on a trading
facility,\75\ including a DCM, or a SEF,\76\ would not satisfy the
Product Test because its price and other economic terms would be
determined through the competitive interaction of multiple buyers and
sellers on a multilateral basis, even though the other material terms
of the agreement, contract, or transaction would be governed by
standardized rules adopted by the facility.\77\
---------------------------------------------------------------------------
\75\ See 7 U.S.C. la(5l) (defining a ``trading facility,'' in
relevant part, to mean a person or group of persons that
constitutes, maintains, or provides a physical or electronic
facility or system in which multiple participants have the ability
to execute or trade agreements, contracts, or transactions by
accepting bids or offers made by other participants that are open to
multiple participants in the facility or system or through the
interaction of multiple bids or multiple offers within a system with
a pre-determined non-discretionary automated trade matching and
execution algorithm).
\76\ See 7 U.S.C. 1a(50) (defining a ``swap execution
facility,'' in relevant part, to mean a trading system or platform
in which multiple participants have the ability to execute or trade
swaps by accepting bids and offers made by multiple participants in
the facility or system).
\77\ Thus, an agreement, contract, or transaction entered into
by an ECP on a bilateral basis through individual negotiation with a
bank or other swap dealer also would not satisfy the Product Test.
---------------------------------------------------------------------------
Although there is not currently a practical overlap between the
casino-style gambling products offered by State and Tribe-regulated
entities (i.e., bilateral and non-tradable) and swaps offered by CFTC-
registered entities (i.e., multilateral and tradable), the Product Test
is designed to nonetheless acknowledge the functional distinction
between the types of products and relationships that traditionally fall
within the scope of derivatives regulation under the CEA from those
traditionally addressed by State or Tribal gaming regulation.\78\ By
distinguishing agreements, contracts, or transactions entered into on a
bilateral basis from those entered into on a multilateral basis, the
Product Test recognizes that a principal purpose of the CEA is to
establish a regulatory framework for price discovery on ``liquid, fair
and financially secure trading facilities'' \79\--that is, trading on
multilateral execution venues such as DCMs and SEFs--whereas State and
Tribal gaming regulation typically concerns bets or wagers in which the
odds or ``line'' are set by a licensed gaming operator acting as
principal with its customers on a bilateral basis. The Product Test
thereby ensures that State and Tribal-regulated entities do not, in the
future, begin offering products properly within the Commission's
jurisdiction, unless they do so consistent with the CEA and the
Commission's regulations.
---------------------------------------------------------------------------
\78\ The insurance exclusion similarly requires that a covered
insurance product not be traded separately from its insurable
interest, on an organized market or over-the-counter. 77 FR at
48217. The consumer transaction exclusion contains a similar
limitation. Id. at 48247.
\79\ 7 U.S.C. 5(a).
---------------------------------------------------------------------------
Therefore, the Commission is adding a new paragraph (7) to the
definition of ``swap'' in 17 CFR 1.3 to further define the term swap to
not include any agreement, contract, or transaction that: (A) is
offered or entered into by a person that is licensed or otherwise
authorized to offer gambling or gaming products, or accept wagers,
under the law of a State or the law of a federally recognized Indian
Tribe pursuant to the Indian Gaming Regulatory Act,\80\ if that person
is acting within the scope of that license or authorization, and such
agreement, contract, or transaction is regulated as gaming or gambling
under applicable state or Tribal law; and (B) is not traded on a board
of trade, an organized exchange, a swap execution facility, or any
other market in which trades are executed multilaterally or subject to
individual negotiation. Paragraph (7) also explicitly identifies sports
wagers, casino games, and other licensed games of chance as products
that are not swaps subject to the Commission's jurisdiction.
---------------------------------------------------------------------------
\80\ 25 U.S.C. 2701 et seq.
---------------------------------------------------------------------------
Finally, the Commission reiterates that this Interim Final Rule
does not further define the term ``security-based
[[Page 65976]]
swap'' and that nothing in the Interim Final Rule should be read to
imply or presume that an agreement, contract, or transaction that does
not meet any of the requirements of this exclusion is necessarily a
swap. Also as previously noted, there may be other types of unlicensed
gambling transactions that do not meet this Interim Final Rule's
exclusion but nonetheless are still not swaps subject to the
Commission's jurisdiction.\81\
---------------------------------------------------------------------------
\81\ See supra note 43 for additional detail.
---------------------------------------------------------------------------
The classifications adopted in this Interim Final Rule are for
purposes of the Commodity Exchange Act. Federal tax treatment and
associated information reporting, withholding, registration, and
payment obligations are determined under the Internal Revenue Code,
applicable Treasury regulations, and IRS guidance.
III. Request for Comment
The Commission welcomes public comments from interested persons
regarding any aspect of the Interim Final Rule. The Commission also
seeks comment on the following specific questions. The Commission will
take into consideration comments received and may modify the Interim
Final Rule if warranted.
(1) This Interim Final Rule limits the exclusion to agreements,
contracts, and transactions offered by a person that satisfies the
Provider Test. Are there additional categories of providers that the
Provider Test should cover beyond State-regulated gaming companies and
Tribes, such as those discussed in note 43? If so, please explain the
basis for including each additional category of qualifying provider.
(2) The Provider Test requires that the agreement, contract, or
transaction be regulated as gaming or gambling under applicable State
or Tribal law. Is it clear which agreements, contracts, or transactions
are subject to these regulations? Are there better ways to define how
State or Tribal gaming regulation should apply to agreements,
contracts, or transactions covered by the exclusion? If so, please
explain.
(3) The Product Test turns on whether the agreement, contract, or
transaction is traded on a board of trade, an organized exchange, a
SEF, or any other market in which trades are either executed
multilaterally or subject to individual negotiation. Are there better
ways to draw an objective, functional distinction between swaps, on the
one hand, and traditional gambling products, on the other hand? If so,
please explain, including how any alternative or additional basis for a
distinction would be consistent with the CEA, including the definitions
of ``swap,'' ``commodity,'' and ``excluded commodity'' and the Special
Rule.
IV. Related Matters
A. Administrative Procedure Act
1. Legal Standard
Under section 533(b)(B) of the Administrative Procedure Act
(``APA''), agencies need not engage in notice-and-comment rulemaking
``when the agency for good cause finds'' that such ``notice and public
procedure . . . are impracticable, unnecessary, or contrary to the
public interest.'' \82\ In interpreting this ``good cause'' standard,
courts have looked to APA Senate Report, which explains that ``
`[i]mpracticable' means a situation in which the due and required
execution of the agency functions would be unavoidably prevented by its
undertaking public rulemaking proceedings . . . . `Public interest'
supplements the term[ ] `impracticable' . . .; it requires that public
rule-making procedures shall not prevent an agency from operating.''
\83\
---------------------------------------------------------------------------
\82\ 5 U.S.C. 553(b)(B).
\83\ See, e.g., National Nutritional Foods Ass'n v. Kennedy, 572
F.2d 377, 385 (2d Cir. 1978) (quoting S. Rep. No. 79-752, at 200
(1945)).
---------------------------------------------------------------------------
``[T]here is a general consensus among the circuit courts that an
agency's invocation of the good cause exception [to notice-and-comment
rulemaking] should . . . be upheld . . . where following the regular
rulemaking procedure would result in serious or real harm.'' \84\
Absent traditional emergencies, courts have found good cause where
notice-and-comment rulemaking would create ``possible fiscal harm,''
where ``the agency's prior regulations or guidelines had been
invalidated by a court order, and thus, immediate promulgation of a new
regulation was needed to prevent harm to the public in the interim,''
\85\ and/or where such rulemakings are not intended to be
permanent.\86\
---------------------------------------------------------------------------
\84\ ITServe Alliance, Inc. v. Scalia, No. 20-146604, 2020 WL
7074391, at 4 (D.N.J. Dec. 3, 2020) (collecting cases).
\85\ Id. at 5.
\86\ See, e.g., American Fed'n of Gov't Emps. v. Block, 655 F.2d
1153, 1157 (D.C. Cir. 1981) (``Common sense suggests that any
administrative action taken in a rare `emergency' situation . . . ,
while perhaps necessarily `immediately effective,' need only be
temporary, pending public notice-and-comment procedures.'').
---------------------------------------------------------------------------
2. Rationale for Interim Final Rule
Recent developments require the Commission to exercise its
statutory authority to further define the term ``swap'' to explicitly
exclude casino-style gambling products, including sports-wagering
contracts entered into on a sportsbook, from the swap definition. As a
group of 39 States and the District of Columbia recently observed,
``[f]ederal and state courts are hopelessly confused and divided over
an issue of immense importance''--whether, among other things, the swap
definition is broad enough to encompass casino-style gambling products,
which would threaten, among other things, State regulatory authority
and Tribal revenue.\87\ For example, and as described above in Part I,
the Commonwealth of Kentucky has claimed that determining that event
contracts are swaps under the CEA amounts to ``[t]ransferring every
ounce of authority over sports wagering from the States to the CFTC.''
\88\ And the State of New Jersey recently argued to the United States
Supreme Court that ``[n]othing in the [CEA] gives the CFTC
unprecedented authority to become the sole regulator of sports gambling
in this country.'' \89\
---------------------------------------------------------------------------
\87\ Brief of Amici Curiae Ohio, 38 Other States, and the
District of Columbia in Support of Petitioners at 1, Flaherty v.
KalshiEX, LLC, No. 26-299 (U.S. Oct. 7, 2026); see also id. at 13
(``So if sports bets are swaps, they must be on DCMs and regulated
by the CFTC, thus making the agency a national gambling czar and
leaving the States with no power.'').
\88\ Memorandum of Law in Support of Motion to Dismiss or, in
the Alternative, for Summary Judgment at 24, United States v.
Kentucky, No. 3:26-cv-49 (E.D. Ky. Aug. 24, 2026).
\89\ Brief for Petitioner, Flaherty v. KalshiEX, LLC, No. 26-299
(Sept. 2, 2026), 2026 WL 2658173, at *32.
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One result of this confusion has been State actions and court
decisions that threaten to expose large areas of hitherto
uncontroversial CFTC jurisdiction to incursion by certain of the
States.\90\ This lack of nuance has already led to overreach that risks
indiscriminate disruption--or the outright dismantling--of federally
regulated event contract markets, whether they purportedly offer
casino-style gambling products or not.
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\90\ See, e.g., United States v. Minnesota, No. 26-cv-2661, 2026
WL 2150211, at *1 (D. Minn. July 27, 2026) (granting the CFTC a
preliminary injunction relating to ``Minnesota lawmakers pass[ing] a
law prohibiting the creation, operation, and advertising of
prediction markets in the state''); CFTC v. New York, No. 26-cv-
3404, Dkt. No. 120 (S.D.N.Y. July 30, 2026) (letter explaining that
``New York seeks a temporary restraining order . . . prohibiting [a
prediction market] from operating as a DCM registered with and
regulated by the CFTC under the Commodity Exchange Act . . . . New
York seeks to prohibit [the prediction market] from operating its
business `within or from New York,' which is where [the prediction
market] is headquartered.'').
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In particular, the Ninth Circuit panel's interpretation of the
``swap'' definition in section 1a(47)(A)(ii)--which would deprive the
CFTC of exclusive
[[Page 65977]]
jurisdiction over most event contracts--threatens to wreak havoc on the
operations of DCMs nationwide. That is particularly true in Arizona,
where the State's pending criminal case against a DCM--for offering
event contracts of any kind--may be permitted to move forward.\91\
Arizona does not stand alone. The State of Minnesota has attempted to
enact a criminal statutory ban on prediction markets; the State of New
York has sought emergency injunctive relief that would prohibit a DCM
from offering event contracts anywhere; and many more enforcement
actions remain pending.\92\ These State-level actions imperil a nascent
industry that Congress has entrusted to the ``exclusive jurisdiction''
of a federal agency, the CFTC.\93\
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\91\ See KalshiEX LLC v. Johnson, 832 F.Supp.3d 954, 958 (D.
Ariz. 2026) (prior to Assad, Arizona filed ``a twenty-count criminal
information'' against the DCM).
\92\ See, e.g., supra note 90.
\93\ 7 U.S.C. 2(a)(1)(A).
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The economic consequences of the shuttering of prediction markets
on a State-by-State basis due to a lack of clear guidance are of a type
and magnitude well in excess of prior cases recognizing good cause to
skip notice-and-comment rulemaking due to ``possible fiscal harm.''
\94\ In one instance, ``actuarial disarray [that] might have posed a
serious threat to the financial stability of a [federal employee]
benefit program'' constituted ``good cause'' to dispense with notice-
and-comment.\95\ In another, market ``confusion'' and ``economic harm
and disruption'' that would have resulted if the agency had been forced
to use ``antiquated [poultry processing] guidelines'' rather than its
interim rule constituted ``good cause.'' \96\ Here, in contrast to the
relatively limited economic harm envisioned in those cases, entire
markets on which various individuals and businesses rely for hedging
and/or financial, economic, or commercial planning purposes--with tens
of billions of dollars of transactions--are at stake.\97\ ``A massive
rush to . . . conduct `actual transactions'--or avoid them,'' as would
occur if any states succeeded in closing prediction markets, similarly
constituted ``good cause'' where the Temporary Emergency Court of
Appeals found that section 553(b)(B) was satisfied by price control
regulations adopted without notice-and-comment.\98\
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\94\ Scalia, 2020 WL 7074391, at *5.
\95\ Nat'l Fed'n of Fed. Emps. v. Devine, 671 F.2d 607, 611
(D.C. Cir. 1982).
\96\ Block, 655 F.2d at 1157.
\97\ See, e.g., Trading volume on prediction markets has soared
in recent months, Pew Research Center (May 27, 2026), <a href="https://www.pewresearch.org/short-reads/2026/05/27/trading-volume-on-prediction-markets-has-soared-in-recent-months/">https://www.pewresearch.org/short-reads/2026/05/27/trading-volume-on-prediction-markets-has-soared-in-recent-months/</a> (noting $24 billion
in trading volume in April 2026 on two prediction markets).
\98\ DeRieux v. Five Smiths, Inc., 499 F.2d 1321, 1332 (Temp.
Emer. Ct. App. 1974) (emphasis added).
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``Good cause'' is further demonstrated by the circumstances that
gave rise to this Interim Final Rule. This is not a case where the CFTC
seeks to circumvent the APA's notice-and-comment requirement. Rather,
like in cases where an ``agency's prior regulations or guidelines had
been invalidated by a court order, . . . immediate promulgation of a
new regulation [is] needed [here] to prevent harm to the public'' while
the judiciary adjudicates the outer contours of one prong of the
``swap'' definition.\99\ Just as a regulatory gap--leading to possible
``confusion'' and ``irremedi[able] financial consequences''--would have
resulted following a prior rule invalidation in Mid-Tex Elec. Coop.,
Inv. v. FERC,\100\ so too do Flaherty, Assad, and other judicial
decisions justify this Interim Final Rule. The ``promulgation of
emergency regulations by [an agency is] a reasonable and perhaps
inevitable response to [some adverse] injunctive court order[s],'' like
certain of those at issue here.\101\
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\99\ See Scalia, 2020 WL 7074391 at *5.
\100\ 822 F.2d 1123, 1133-34 (D.C. Cir. 1987); see also Block,
655 F.2d at 1157 (``good cause'' satisfied where ``court granted . .
. motion for preliminary injunction, declaring [existing] guidelines
. . . null and void''); United Farm Works v. U.S. Dep't of Lab.,
2026 WL 1345918, at *2 (E.D. Cal. May 14, 2026) (interim final rule
``good cause'' justified by agency after prior rule ``had been
vacated by . . . [a] final judgment'' and even earlier version of
the rule did not address ``regulatory gap'' that had emerged in the
meantime; preliminary injunction challenging interim final rule
denied on other grounds).
\101\ Block, 655 F.2d at 1157.
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Indeed, regulators have used interim final rules in circumstances
analogous to the confusion resulting in part from the emerging circuit
split over the scope of the CEA's ``swap'' definition in the context of
event contracts. For example, after a district court issued a state law
preemption opinion that was in tension with ``the [Office of the
Comptroller of the Currency (``OCC'')] and courts' longstanding
interpretation'' of a statute, the OCC issued an interim final rule to
stave off ``regulatory confusion . . . and the potential consequences
of such confusion.'' \102\ Like the dangers posed by State regulatory
overreach to national prediction (and other derivatives) markets, the
State law in question would have ``create[d] a complex and potentially
unworkable [State] standard,'' which ``national banks may [have]
take[n] drastic actions to avoid,'' thereby leading to potential
``economic harm and disruption and pos[ing] significant risks to the
safety and soundness of national banks and the national banking system
as a whole.'' \103\
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\102\ National Bank Non-Interest Charges and Fees, 91 FR 22989,
22992 (Apr. 29, 2026) (codified at 12 CFR 7).
\103\ Id.
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For the reasons described above, the Commission also finds that
good cause exists to make this rule effective immediately upon
publication.\104\
---------------------------------------------------------------------------
\104\ 5 U.S.C. 553(d)(3).
---------------------------------------------------------------------------
B. Regulatory Flexibility Act
The Regulatory Flexibility Act (``RFA'') \105\ requires federal
agencies to consider whether the rules they propose will have a
significant economic impact on a substantial number of small entities
and, if so, to provide a regulatory flexibility analysis regarding the
economic impact on those entities. However, the RFA does not apply when
a general notice of proposed rulemaking is not required.\106\ As
explained above, the Commission has determined that this rule is exempt
from the notice-and-comment requirements of the APA,\107\ for ``good
cause.'' Accordingly, the RFA's requirements relating to an initial and
final regulatory flexibility analysis do not apply to this rule.\108\
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\105\ 5 U.S.C. 601 et seq.
\106\ 5 U.S.C. 601, 603, and 604.
\107\ Id.5 U.S.C. 553(b).
\108\ See 5 U.S.C. 603 (regulatory flexibility analysis under
the RFA is required only when an agency must publish a notice of
proposed rulemaking for comment).
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C. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (``PRA'') \109\ imposes certain
requirements on federal agencies, including the Commission, in
connection with conducting or sponsoring any ``collection of
information,'' as defined by the PRA. Under the PRA, an agency may not
conduct or sponsor, and a person is not required to respond to, a
collection of information unless it displays a currently valid control
number from the Office of Management and Budget (``OMB'').\110\ The PRA
is intended, in part, to minimize the paperwork burden created for
individuals, businesses, and other persons as a result of the
collection of information by federal agencies, and to ensure the
greatest possible benefit and utility of information created,
collected, maintained, used, shared, and disseminated by or for the
federal
[[Page 65978]]
government.\111\ The PRA applies to all information, regardless of form
or format, whenever the federal government is obtaining, causing to be
obtained, or soliciting information, and includes required disclosure
to third parties or the public, of facts or opinions, when the
information collection calls for answers to identical questions posed
to, or identical reporting or recordkeeping requirements imposed on,
ten or more persons.\112\
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\109\ 44 U.S.C. 3501 et seq.
\110\ See 44 U.S.C. 3507(a)(3); 5 CFR 1320.5(a)(3).
\111\ See 44 U.S.C. 3501.
\112\ See 44 U.S.C. 3502(3).
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This Interim Final Rule would not impose any new collection of
information requirements that require approval of OMB under 44 U.S.C.
3507(d), nor would it amend or otherwise revise any existing collection
of information subject to the PRA. Consistent with the Commission's
jurisdiction, this Interim Final Rule clarifies the definition of
``swap'' excludes casino-style gambling products.
The Interim Final Rule does not establish any new reporting
requirement under the CEA or the Commission's regulations applicable to
any Commission registrant or market participant; establish any new
recordkeeping requirement beyond those already imposed under the CEA
and the Commission's existing regulations, which are currently approved
by OMB under existing control numbers; impose any new third-party
disclosure obligation; or modify the substantive scope, frequency,
form, or content of any existing information collection of the
Commission currently approved by OMB.
The Interim Final Rule does not alter the burden associated with
existing collections currently approved by OMB. Any incremental
activity that may occur as an indirect consequence of registrants
electing to conduct business within the federal regulatory perimeter
clarified by this Interim Final Rule reflects the application of
existing, previously approved information collections to a new class of
underlying transactions and does not itself constitute a new or revised
collection of information within the meaning of the PRA.
Accordingly, the requirements of the Paperwork Reduction Act do not
apply to this rulemaking.
D. Consideration of Benefits and Costs
1. Introduction
The Commission is mindful of the economic effects, including the
benefits and costs, of the Interim Final Rule. Section 15(a) of the CEA
requires the Commission to consider the benefits and costs of its
actions before promulgating a regulation under the CEA or issuing
certain orders.\113\ As required by section 15(a), the Commission
evaluates these benefits and costs evaluated in light of five broad
areas of market and public concern: (1) protection of market
participants and the public; (2) efficiency, competitiveness, and
financial integrity of futures markets; (3) price discovery; (4) sound
risk management practices; and (5) other public interest
considerations.
---------------------------------------------------------------------------
\113\ 7 U.S.C. 19(a).
---------------------------------------------------------------------------
The Interim Final Rule excludes casino-style gambling products from
the definition of swaps. In promulgating the Interim Final Rule, the
Commission would not change the legal rights or obligations of market
participants under the CEA because the Commission already treats
casino-style gambling products as outside its jurisdiction. Instead,
consistent with the CEA, the Interim Final Rule will reduce
interpretive uncertainty by codifying the Commission's understanding
that regulation of casino-style gambling products is outside of the
Commission's jurisdiction, affirming the long-standing regulatory
authority of States and Tribes.
The Commission qualitatively discusses the benefits and costs of
the Interim Final Rule below because it is not practicable to quantify
the effect of greater regulatory certainty on market participant
behavior.
2. Baseline
The baseline against which the benefits and costs of the Interim
Final Rule are measured consists of the current regulatory framework
and the current state of Commission-regulated markets.
The Commission has exclusive jurisdiction to regulate transactions
involving swaps (other than security-based swaps).\114\ Under the plain
language of the CEA, casino-style gambling products are not swaps or
any other instrument that the Commission regulates and therefore,
outside the scope of the Commission's jurisdiction. The Commission is
not aware of any casino-style gambling products that are treated as
Commission-regulated instruments or otherwise traded on Commission-
licensed DCMs or SEFs.
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\114\ See 7 U.S.C. 2(a)(1)(A).
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However, as discussed above, recent court decisions regarding
whether sports-related event contracts are swaps and the breadth of the
swaps definition under the CEA, including casino-style gambling
products, has created legal uncertainty.\115\
---------------------------------------------------------------------------
\115\ Compare Flaherty, 172 F.4th at 227, with Assad, 2026 WL
2543846.
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3. Benefits
Because the Interim Final Rule does not change the legal rights or
obligations of market participants under the CEA, the primary benefit
of the Interim Final Rule is the immediate mitigation of regulatory and
interpretive uncertainty triggered by recent, conflicting federal
appellate court interpretations of the CEA's swap definition.
By expressly stating that traditional casino-style gambling
products and sportsbook wagers do not constitute swaps, the Interim
Final Rule could benefit gambling industry participants, State gaming
commissions, and Tribal authorities. Insofar as industry participants
and others are less likely to misapprehend the scope of the
Commission's regulatory authority, they may benefit by allocating less
capital to challenge or defend against Federal derivatives oversight,
or to unnecessarily re-engineer their localized wagering
infrastructures to meet incompatible Federal frameworks.
4. Costs
Because the Interim Final Rule codifies the Commission's long-
standing operational baseline--that traditional casino-style gambling
products reside outside its jurisdiction--it does not directly impose
any new or incremental compliance costs under the CEA or the
Commissions' regulations on derivatives market participants or retail
gaming operators.
Codification of the exclusion of casino-style gambling products
might slightly increase the incentive for certain entities to attempt
to structure certain derivatives contracts as locally regulated
gambling wagers to evade Commission jurisdiction. However, because the
alternative to Federal regulation is compliance with a patchwork of
State and Tribal regulatory frameworks (including outright prohibition
in some jurisdictions), the risk of increased regulatory arbitrage is
likely minimal. If entities nevertheless seek to evade Commission
jurisdiction, the Commission understands that State and Tribal
regulatory frameworks--although different than the Federal regulatory
framework--would also offer some protection to industry participants
and the public.
5. Section 15(a) Factors
Because the Interim Final Rule is consistent with existing law and
market
[[Page 65979]]
practice, it will have limited impact on protecting market participants
and the public; efficiency, competitiveness, and financial integrity of
the futures markets; price discovery; sound risk management practices;
and other public interest considerations.
6. Regulatory Alternatives
Given the Interim Final Rule seeks only to clarify that casino-
style gambling products are outside of the Commission's jurisdiction,
the Commission has not identified any viable regulatory alternatives.
E. Antitrust Laws
Section 15(b) of the CEA requires the Commission to take into
consideration the public interest to be protected by the antitrust laws
and endeavor to take the least anticompetitive means of achieving the
objectives of the CEA as well as the policies and purposes of the CEA,
in issuing any order or adopting any Commission rule or regulation
(including any exemption under section 4(c) or 4c(b)), or in requiring
or approving any bylaw, rule, or regulation of a contract market or
registered futures association established pursuant to section 17 of
the CEA.\116\
---------------------------------------------------------------------------
\116\ 7 U.S.C. 19(b).
---------------------------------------------------------------------------
The Commission believes that the public interest protected by the
antitrust laws is the promotion of competition. The Commission has
considered whether the Interim Final Rule is anticompetitive and has
identified no anticompetitive effects. The Commission also has not
identified any less anticompetitive means of achieving the purposes of
the CEA.
F. Executive Orders 12866, 13563, and 14192
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select those regulatory approaches that
maximize net benefits (including potential economic, environmental,
public health and safety, and other advantages; and distributive
impacts). Section 3(f) of Executive Order 12866 defines a ``significant
regulatory action'' as any regulatory action that is likely to result
in a rule that may: (1) have an annual effect on the economy of $100
million or more or adversely affect in a material way the economy, a
sector of the economy, productivity, competition, jobs, the
environment, public health or safety, or State, local, or Tribal
governments or communities; (2) create a serious inconsistency or
otherwise interfere with an action taken or planned by another agency;
(3) materially alter the budgetary impact of entitlements, grants, user
fees, or loan programs or the rights and obligations of recipients
thereof; or (4) raise novel legal or policy issues arising out of legal
mandates, or the President's priorities.
OMB has determined that this action is a significant regulatory
action as defined under section 3(f) of Executive Order 12866 and
therefore this action has been reviewed by OMB, consistent with
Executive Order 14215.
This Interim Final Rule is not an Executive Order 14192 regulatory
action, because it imposes no more than de minimis net costs.
G. Congressional Review Act
Subtitle E of the Small Business Regulatory Enforcement Fairness
Act of 1996, also known as the Congressional Review Act (``CRA''),
generally provides for congressional review of agency rules. CFTC must
submit a report to Congress and the Comptroller General when it issues
a final rule, as defined in the CRA. An agency rule, in addition to
being subject to congressional oversight, may also be subject to a
delayed effective date if the rule is a ``major rule.'' OIRA has
determined that this rule is not a ``major rule'' within the meaning of
the relevant sections of the CRA. CFTC will also file appropriate
reports with Congress and the Comptroller General so this rule may be
reviewed.
List of Subjects in 17 CFR Part 1
Swaps.
For the reasons set forth in the preamble, the Commodity Futures
Trading Commission amends 17 CFR part 1 as follows:
PART 1--GENERAL REGULATIONS UNDER THE COMMODITY EXCHANGE ACT
0
1. The authority citation for part 1 continues to read as follows:
Authority: 7 U.S.C. 1a, 2, 5, 6, 6a, 6b, 6c, 6d, 6e, 6f, 6g,
6h, 6i, 6k, 6l, 6m, 6n, 6o, 6p, 6r, 6s, 7, 7a-1, 7a-2, 7b, 7b-3, 8,
9, 10a, 12, 12a, 12c, 13a, 13a-1, 16, 16a, 19, 21, 23, and 24
(2012).
0
2. In Sec. 1.3, in the definition of the term, Swap, add paragraph (7)
to read as follows:
Sec. 1.3 Definitions.
* * * * *
Swap. * * *
(7) Casino-style gambling products. (i) The term swap as used in
section 1a(47) of the Commodity Exchange Act does not include an
agreement, contract, or transaction that:
(A) Is offered or entered into by a person that is licensed or
otherwise authorized to offer gambling or gaming products, or accept
wagers, under the law of a State or the law of a federally recognized
Indian tribe pursuant to the Indian Gaming Regulatory Act (25 U.S.C.
2701 et seq.), is acting within the scope of that license or
authorization, and such agreement, contract, or transaction is
regulated as gaming or gambling under applicable State or Tribal law;
and
(B) Is not traded on a board of trade, an organized exchange, a
swap execution facility, or any other market in which trades are
executed multilaterally or subject to individual negotiation.
(ii) Provided that the requirements of paragraph (7)(i) of this
definition are met, and without limiting the generality of paragraph
(7)(i) of this definition, the following agreements, contracts, and
transactions are excluded from the term swap:
(A) Sports wagers. Any agreement, contract, or transaction in which
a licensed sportsbook or sports wagering operator accepts a wager on
the outcome of one or more sporting events;
(B) Casino games. Any agreement, contract, or transaction in which
a licensed casino operator accepts a wager in connection with a casino
table game, slot machine, or other electronic gaming device; and
(C) Other licensed games of chance. Any agreement, contract, or
transaction in which a licensed operator accepts a wager in connection
with any other game of chance (such as bingo, pool wagering, lotteries,
and raffles).
Issued in Washington, DC, on October 15, 2026, by the
Commission.
Christopher Kirkpatrick,
Secretary of the Commission.
Note: The following appendix will not appear in the Code of
Federal Regulations.
Appendix to Further Definition of ``Swap'' to Exclude Casino-Style
Gambling Products--Commission Voting Summary
On this matter, Chairman Selig voted in the affirmative. No
Commissioner voted in the negative.
[FR Doc. 2026-21376 Filed 10-16-26; 8:45 am]
BILLING CODE 6351-01-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.