CFTC Rules Casino Wagers and Sportsbook Bets Are Not Swaps

The Commodity Futures Trading Commission has ruled that casino-style gambling products — wagers placed on sportsbooks, casino games and other licensed games of chance — are not swaps, closing years of conflicting federal appellate rulings. The interim final rule, RIN 3038–AF81, took effect October 19, 2026, the day it was published in the Federal Register (Vol. 91, No. 200, Rules and Regulations, p. 65969).

The measure amends 17 CFR Part 1 by adding paragraph (7) to the definition of “Swap” in 17 CFR 1.3. It codifies what the agency describes as its longstanding position that federal oversight of derivatives markets “does not intrude upon the traditional State and Tribal regulation of casino-style gambling products.” The Commission acted under section 712(d)(1) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the same authority it used in 2012, jointly with the Securities and Exchange Commission, to carve insurance contracts and ordinary consumer agreements out of the swap definition (77 FR 48208).

A two-part test for exclusion

The new paragraph (7) sets out a cumulative test. An agreement, contract or transaction is excluded from the swap definition only if it satisfies both a provider test and a product test:

• Provider Test: the instrument must be offered or entered into by a person licensed or otherwise authorized to offer gambling or gaming products, or accept wagers, under the law of a State or of a federally recognized Indian tribe pursuant to the Indian Gaming Regulatory Act, acting within the scope of that license, and the instrument must be regulated as gaming or gambling under applicable State or tribal law.
• Product Test: the instrument must not be traded on a board of trade, an organized exchange, a swap execution facility or any other market where trades are executed multilaterally or subject to individual negotiation.
• Named categories: sports wagers accepted by a licensed sportsbook or sports wagering operator; casino games, including table games, slot machines and other electronic gaming devices; and other licensed games of chance such as bingo, pool wagering, lotteries and raffles.

The Commission stressed that the exclusion is non-exclusive and that an instrument failing the test is not automatically a swap. It also said the rule does not further define “security-based swap” and does not address matters within the SEC’s jurisdiction.

Courts split, states moved, agency cites good cause

The rule responds to a three-way circuit split. The Third Circuit held in KalshiEX, LLC v. Flaherty that sports-related event contracts traded on a CFTC-licensed designated contract market fit the swap definition; the Sixth Circuit in KalshiEX LLC v. Schuler and the Ninth Circuit in KalshiEX, LLC v. Assad reasoned that sports event contracts and casino-style sports wagering are legally indistinguishable, warning that treating them as swaps would federalize ordinary betting. A group of 39 States and the District of Columbia told the Supreme Court that courts are “hopelessly confused and divided” on the question, and 40 States plus the District filed comments on the Commission’s earlier proposal.

The Commission invoked the Administrative Procedure Act’s good cause exception to skip notice-and-comment and to make the rule effective immediately, citing pending State actions — a criminal case in Arizona, a statutory ban in Minnesota and injunctive relief sought by New York — that it said imperil prediction markets nationwide. It concluded that the Regulatory Flexibility Act’s analytical requirements do not apply.

Companion proposal would classify event contracts as swaps

Published the same day, a separate notice of proposed rulemaking, RIN 3038–AF82, would move in the opposite direction for event contracts, proposing to define “swap” to explicitly include contracts based on sports, politics, cultural and weather-related events. The Commission said the two documents are meant to draw a functional line between tradable, centrally cleared derivatives and bilateral, house-priced wagers.

Comment window and vote

Comments on the interim final rule are due November 18, 2026, filed via Regulations.gov or sent to Secretary of the Commission Christopher Kirkpatrick at the agency’s Washington headquarters. The rule was issued in Washington on October 15, 2026; Chairman Selig voted in the affirmative and no Commissioner voted in the negative. The Commission also asked whether the provider test should cover additional categories of operators and whether a better objective distinction between swaps and gambling products exists.

For sportsbooks, tribal operators and State gaming commissions, the practical effect is that wagers priced by a licensed house are confirmed as outside federal derivatives law, removing the threat of exchange-trading and clearing obligations. The protection is conditional, however: any licensed operator that routes the same bets through a multilateral, market-priced venue would fall back inside the CFTC’s perimeter, and the parallel event-contract proposal keeps the boundary under active review.

Source: Federal Register, Vol. 91, No. 200, 19 October 2026, Rules and Regulations, p. 65969 (official reference: 2026-21376; RIN 3038–AF81; 17 CFR Part 1).