CFTC carves casino wagers out of the swap definition

The Commodity Futures Trading Commission has drawn a venue line through the swap definition: from 19 October 2026, a casino-style wager that meets a provider test and a product test is outside the term “swap”, while exchange-traded event contracts are left to a same-day proposal that would place them inside it.

The interim final rule, printed at 91 FR 65969 as Regulation Identifier Number 3038-AF81, amends the swap definition in 17 CFR 1.3. It is effective on 19 October 2026, and comments must be received by 18 November 2026. Section 1a(47)(A)(ii) of the Commodity Exchange Act already treats as a swap a payment that depends on an event associated with a potential financial, economic or commercial consequence. Appellate courts have asked whether a sportsbook ticket and an exchange-listed sports contract are the same instrument. What follows sets out the two-part exclusion, the same-day proposal that would name event contracts as swaps, and section 10 of the Gambling Act 2005.

Key facts

• Effective 19 October 2026; comments must be received by 18 November 2026. Document 2026-21376, 91 FR 65969, RIN 3038-AF81, docket CFTC-2026-2214. Source: Federal Register.
• Paragraph (7) is added to “swap” in 17 CFR 1.3. The Provider Test and the Product Test must both be met. Source: the regulatory text.
• Issued in Washington, DC, on 15 October 2026. Chairman Selig voted yes. No Commissioner voted no. Source: the voting summary.
• Same-day proposal, document 2026-21377, 91 FR 66022, RIN 3038-AF82, docket CFTC-2026-2213. Not effective. Comments by 18 November 2026. Source: Federal Register.
• As of 1 September 2026, at least seven designated contract markets offered sports-related event contracts to U.S. persons. August 2026 average monthly volume was about $1.5 billion. Source: the proposal’s baseline.
• The good-cause discussion cites Pew Research Center, 27 May 2026, for $24 billion of volume in April 2026 on two prediction markets. Source: the interim final rule.
• The Office of Management and Budget called the rule significant under Executive Order 12866, section 3(f). It is not a “major rule” under the Congressional Review Act, and net costs are no more than de minimis under Executive Order 14192. Source: the interim final rule.

Methodology and sources

The primary text is the interim final rule of 19 October 2026, Further Definition of “Swap” To Exclude Casino-Style Gambling Products, document 2026-21376, read with CFTC Release Number 9309-26 of 9 October 2026. The second rule set is the same-day proposal, Further Definition of “Swap”—Inclusions, document 2026-21377, announced in Release Number 9310-26. The non-US text is section 10 and section 33 of the Gambling Act 2005 and section 23 of the Financial Services and Markets Act 2000. The penalty example is Release Number 8478-22 of 3 January 2022. Court words are those the interim final rule prints. Dates, the RIN and the deadline are those printed on FederalRegister.gov. The proposal is not treated as final. Further coverage is on the regulation desk.

Related:SEC proposes wider fund crosses under Rule 17a-7

What the casino-style exclusion actually says

In KalshiEX LLC v. Schuler, No. 26-3196 (6th Cir. 25 September 2026), a swap reading would put “every sports wager placed in a casino, on an online sports book, or between two friends at a bar” on a designated contract market. KalshiEX, LLC v. Assad, No. 25-7516 (9th Cir. 28 August 2026), held those sports contracts likely not to be swaps. That circuit split over sports event contracts is what the rule says it answers. KalshiEX, LLC v. Flaherty, 172 F.4th 220 (3d Cir. 2026), pointed to the further-define power this interim final rule uses.

The 2012 joint rule, 77 FR 48208, kept insurance outside 7 U.S.C. 1a(47)(A)(ii) and left credit default swaps inside. Paragraph (7) uses the same two hinges for licensed sportsbook wagers, casino games, slots, bingo, pool wagering, lotteries and raffles under state law or the Indian Gaming Regulatory Act, 25 U.S.C. 2701 et seq.

The Commodity Futures Trading Commission's casino-style exclusion is a two-part screen. Under the interim final rule, RIN 3038-AF81, effective 19 October 2026, an agreement sits outside the swap definition in 17 CFR 1.3 only if it meets both the Provider Test and the Product Test. The provider must be licensed or otherwise authorized to offer gambling or to accept wagers under state law or the Indian Gaming Regulatory Act, 25 U.S.C. 2701 and following, must act within that authority, and the transaction must be regulated as gaming or gambling. The product must not be traded on a board of trade, an organised exchange, a swap execution facility, or any other market where trades are executed multilaterally or are subject to individual negotiation. Sportsbook wagers, casino games and other licensed games of chance are named where both tests are met. Failing either test does not itself make a product a swap.

The exclusion is non-exclusive. A miss is not a finding that the product is a swap. The Securities and Exchange Commission joins only under section 712(d)(1) of the Dodd-Frank Act, 15 U.S.C. 8302(d)(1). The text does not define “security-based swap”. The Federal Reserve Board was shown the rule.

Sources: 91 FR 65969; 91 FR 66022; Gambling Act 2005, ss. 10 and 33; Financial Services and Markets Act 2000, s. 23. Last updated: 20 October 2026.

How three rule sets divide the same payout

A sportsbook sets the price. A designated contract market matches bids under Core Principle 9, 7 U.S.C. 7(d)(9). The interim final rule also cites 31 U.S.C. 5362(1)(E) and the Special Rule, 7 U.S.C. 7a-2(c)(5)(C).

The proposal would add paragraph (2)(i)(G): “Event contracts, including those based on sports-, politics-, cultural, and weather-related events.” The preamble says sections 1a(47)(A)(i), (ii) and (iv) already reach them, and that casino gambling is untouched. The Commission says codification might slightly increase the incentive to structure a derivative as a local wager, and calls the arbitrage risk “likely minimal”.

Section 10(1) of the Gambling Act 2005, in force from 1 October 2005, removes from section 9(1) a bet that is a regulated activity under section 22 of the Financial Services and Markets Act 2000. That is an authorisation question, not an order-book question.

Three rule sets now separate a wager from a derivative. The CFTC interim final rule, 91 FR 65969, RIN 3038-AF81, effective 19 October 2026, excludes a product when a state-licensed or tribal-licensed person offers it as regulated gaming and it is not traded on a multilateral market or made subject to individual negotiation. The same day's proposal, 91 FR 66022, RIN 3038-AF82, would add paragraph (2)(i)(G) to 17 CFR 1.3 so that swap includes event contracts based on sports, politics, culture and weather. That sentence is not in force, and comments are due on 18 November 2026. Section 10 of the Gambling Act 2005, in force for subsections (1) and (2) from 1 October 2005, provides that a bet is not a bet under section 9(1) if making or accepting it is a regulated activity under section 22 of the Financial Services and Markets Act 2000.

“Casino-style gambling products are not derivatives. Just as the CFTC has done with respect to other products historically regulated by the states, the Commission today provides clarity regarding the limits of its regulatory remit by codifying the exclusion of casino-style gambling products from the ‘swap’ definition.”

— Michael S. Selig, Chairman, Commodity Futures Trading Commission (CFTC Release Number 9309-26, 9 October 2026)

Where off-exchange event markets have already been penalised

On 3 January 2022, Release Number 8478-22, the CFTC settled with Blockratize, Inc., doing business as Polymarket, for off-exchange event-based binary options offered without designated-contract-market designation or swap-execution-facility registration. The order imposed a $1.4 million civil monetary penalty, a wind-down and a cease-and-desist. From about June 2020 the site said “bet on your beliefs” and listed more than 900 event markets. Each pair of binary options was found to be swaps. No court docket is printed, and the October rule does not withdraw the order.

“All derivatives markets must operate within the bounds of the law regardless of the technology used, and particularly including those in the so-called decentralized finance or ‘DeFi’ space. Market participants should proactively engage with the CFTC to ensure that our markets remain robust, transparent, and afford customers the protection provided under the CEA and our regulations.”

— Vincent McGonagle, Acting Director of Enforcement, Commodity Futures Trading Commission (CFTC Release Number 8478-22, 3 January 2022)

The charge this rule answers is that a licensed sportsbook wager is a swap if an event contract is. These cases are not finished penalties. Arizona’s twenty-count criminal information is described in KalshiEX LLC v. Johnson, 832 F. Supp. 3d 954 (D. Ariz. 2026). A preliminary injunction issued in United States v. Minnesota, No. 26-cv-2661, 2026 WL 2150211 (D. Minn. 27 July 2026). A 30 July 2026 filing in CFTC v. New York, No. 26-cv-3404 (S.D.N.Y.), sought to stop a registered exchange. New York’s suit and the Third Circuit preemption fight remain open, with the 7 October 2026 brief of Ohio and 38 other states plus the District of Columbia in Flaherty v. KalshiEX, LLC, No. 26-299. The split between the CFTC and state gaming regulators is not closed by publication.

What the line means for exchanges, sportsbooks and compliance teams

Futures commission merchants and introducing brokers face no new collection in the Paperwork Reduction Act discussion. A house wager inside a state or tribal authorisation, and off any multilateral or negotiated market, is outside the swap definition. An event contract on a designated contract market fails the Product Test and, on the proposal’s preliminary view, is a swap under section 2(e). A block desk already intermediating Kalshi event contracts sits on that second side.

Listing a sport does not bring an exchange inside the exclusion. Impartial access under 17 CFR 38.151 still stops a designated contract market cutting off a winner. Work on the swap-execution-facility order-book rule for permitted transactions does not pull a house wager in or push an exchange-traded event contract out. Operators under the Indian Gaming Regulatory Act stay inside paragraph (7) only on house-priced rules, within the licence. Note 43 withholds the text from an illegal book.

Comments must cite RIN 3038-AF81 on docket CFTC-2026-2214, or go to Christopher Kirkpatrick, Secretary, Three Lafayette Centre, 1155 21st Street NW, Washington, DC 20581. The proposal is RIN 3038-AF82, docket CFTC-2026-2213.

The opposing sentence below is not a comment on this rule. On 30 April 2026 the Ohio Attorney General’s office announced a filing that asked the Commission to treat sports-related event contracts as state gambling. The interim final rule later cites that Yost letter.

“This is gambling, no matter how they try to dress it up – and that means it belongs under state jurisdiction. States have a longstanding right and responsibility to protect their citizens from the dangers of gambling, whether it’s on a prediction market or a casino floor.”

— Dave Yost, Ohio Attorney General, Ohio Attorney General’s Office (news release, 30 April 2026)

What is still open on the two dockets

Both texts were issued in Washington on 15 October 2026. Only the interim final rule is in force, effective on publication under 5 U.S.C. 553(d)(3), after a good-cause finding under 5 U.S.C. 553(b)(B). The stated reason is that the appellate split threatens exchange business and state and tribal revenue. Because the Commission relied on good cause, the Regulatory Flexibility Act’s initial and final analyses do not apply. The Commission says comments may still lead it to modify the text.

Three questions stay open through the 18 November 2026 deadline. Should the Provider Test add the unlicensed cases in note 43? Which contracts are “regulated as gaming or gambling”? Is there a sharper line than multilateral execution or individual negotiation, still consistent with “swap”, “commodity”, “excluded commodity” and the Special Rule? The Product Test shelters the house wager and keeps a negotiated derivative inside the Act.

If adopted, paragraph (2)(i)(G) would name event contracts as swaps. On the preliminary view, retail trading would be limited to a designated contract market, and the Special Rule power over gaming-related event contracts would remain. Both votes were Chairman Selig yes, no Commissioner no. Comments on both RINs must be received by 18 November 2026. Until a final rule, inclusion rests on the statute and on Schuler, Assad and Flaherty, not on paragraph (2)(i)(G).

TL;DR

The CFTC interim final rule, RIN 3038-AF81, took effect on 19 October 2026. It excludes a casino-style product from the swap definition only when a state-licensed or tribal-licensed provider offers it as regulated gaming and the product is not traded on a multilateral or individually negotiated market. Sportsbook wagers and casino games are named examples. Exchange-traded event contracts fail that screen. A separate proposal, RIN 3038-AF82, would state that event contracts on sports, politics, culture and weather are swaps, but it is not in force. Comments on both must be received by 18 November 2026. The Commission reports that in August 2026 average monthly event-contract volume was about $1.5 billion on designated contract markets reporting to it. The live risks are the skipped notice period and any attempt to dress a tradable contract as a house wager.

FAQ

What does RIN 3038-AF81 remove from the swap definition?

It removes a casino-style product that meets both tests in new paragraph (7) of 17 CFR 1.3. The provider must be licensed under state law or the Indian Gaming Regulatory Act and must act inside that authority. The transaction must be regulated as gaming, and it must not trade on a multilateral or individually negotiated market. Sportsbook wagers and casino games are named. The rule took effect on 19 October 2026. Missing a test does not itself make the product a swap.

When do comments close, and did the rule wait for them?

The Federal Register prints 18 November 2026 for the interim final rule, RIN 3038-AF81, and the same date for the proposal, RIN 3038-AF82. Release Number 9309-26 of 9 October 2026 said the exclusion would be effective on publication. The Register set the effective date at 19 October 2026. The Commission used 5 U.S.C. 553(b)(B) to skip prior notice and 5 U.S.C. 553(d)(3) for immediate effect. It says it may still change the text after comments arrive.

Does the exclusion cover a sports contract on a designated contract market?

No. The Product Test withholds the exclusion from a board of trade, an organised exchange, a swap execution facility, or another multilateral or individually negotiated market. A designated contract market is in that group. An exchange contract and a house wager can share a sporting result and remain different instruments. The same-day proposal, not yet in force, would call sports event contracts swaps. Until a final rule, status follows the statute.

How is the United Kingdom’s betting line different?

Section 10(1) of the Gambling Act 2005, in force since 1 October 2005, says a bet is not a section 9(1) “bet” where making or accepting it is a regulated activity under section 22 of the Financial Services and Markets Act 2000. The test is legal character, not an order book. Section 33 allows, on summary conviction, up to 51 weeks, a level-5 fine, or both. Section 23 of the 2000 Act allows two years on indictment.

If a product fails either test, is it a swap?

No presumption says that it is. The interim final rule states that a contract outside paragraph (7) still has to be tested under 7 U.S.C. 1a(47). The exclusion is also non-exclusive. A private bet, or a sportsbook illegal under state law, might not be a swap, and still does not receive the codified text. The Commission’s example of a miss is an eligible contract participant negotiating with a swap dealer.

What penalty has the CFTC already imposed for off-exchange event binaries?

On 3 January 2022 the Commission ordered Blockratize, Inc., doing business as Polymarket, to pay a $1.4 million civil monetary penalty. Release Number 8478-22 says the firm offered event-based binary options off-exchange from about June 2020, without designated-contract-market designation or swap-execution-facility registration. It also had to wind down non-compliant markets. Each event contract was found to be a swap. The October exclusion does not withdraw that order.

This article is informational analysis only and does not constitute legal, regulatory, tax, or investment advice. Regulatory frameworks change frequently and interpretation depends on facts and circumstances; primary documents and official regulator guidance always supersede summaries. Firms should consult qualified legal counsel and their relevant supervisory authority before taking any action based on the analysis above.