Executive Summary
- What’s new: On October 9, 2026, the CFTC issued two companion releases: a proposed rule that would expressly include event contracts in the definition of “swap,” and an interim final rule that codifies the exclusion of casino-style gambling products from that definition.
- Why it matters: Together, the releases seek to resolve uncertainty created by conflicting court rulings over the CFTC’s jurisdiction and the line between federally regulated event contracts and gambling products regulated by states and tribes.
- What to do next: Market participants should consider submitting comments on both releases by November 18, 2026.
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On October 9, 2026, the Commodity Futures Trading Commission (CFTC or Commission) published a Notice of Proposed Rulemaking (NPRM) that would amend the definition of “swap” under Section 1(a) of the Commodity Exchange Act (CEA) to expressly include event contracts, including those based on sports, politics, cultural and weather-related events. On the same day, the Commission issued an Interim Final Rule (IFR) codifying its position that casino-style gambling products are excluded from the swap definition.
The Event Contracts NPRM
The NPRM would add a new paragraph (2)(i)(G) to the definition of “swap” in CFTC Rule 1.3 that would explicitly include “[e]vent contracts, including those based on sports-, politics-, cultural-, and weather-related events” within that definition. The NPRM points to four prongs of the statutory definition of swap in the Commodity Exchange Act (CEA) in support of the new rule.
- Section 1a(47)(A)(i): Options on commodities. Event contracts fit the prong covering options on commodities, because many are structured as binary options on events, and the CFTC treats those events as commodities.
- Section 1a(47)(A)(ii): Event-contingent payments. Event contracts fall under the prong that includes any transaction whose payment depends on an event “associated with a potential financial, economic, or commercial consequence.”
- Section 1a(47)(A)(iv): Trade usage. Event contracts fall within the prong covering transactions “commonly known to the trade as a swap,” because the derivatives market has long treated them that way.
- Section 1a(47)(A)(vi): Combinations and options. Event contracts can be “any combination or permutation of, or option on” a transaction described in the other prongs.
The Commission also pointed to the “Special Rule” in the CEA as supporting its jurisdiction over sports-, politics-, cultural- and weather-related event contracts. The Special Rule provides that the CFTC may determine that contracts in certain commodities that are based upon the occurrence of an event may be prohibited if it involves activity that is (i) unlawful, (ii) terrorism, (iii) assassination, (iv) war, (v) gaming or (vi) other similar activity, and is determined by the Commission to be against the public interest. In the CFTC’s view, the “Special Rule” confirms that commodities include nonfinancial events, and that an event contract can be a swap even if the event is not inherently associated with a financial, economic or commercial consequence.
Lastly, the CFTC pointed to numerous financial, economic or commercial consequences that may be potentially associated with sports-, politics-, cultural- and weather-related events. The CFTC notes that weather has potential financial consequences for agriculture and with regard to energy use, and that a local sports team winning or losing a sporting event can have significant economic consequences on cities and local businesses.
Comments on the NPRM must be submitted in writing via Regulations.gov within 30 days after its publication in the Federal Register, or by November 18, 2026.
The Casino-Style Gambling IFR
The IFR explicitly excludes casino-style gambling products — including sportsbook wagers, casino games, bingo, pool wagering, lotteries and raffles — from the definition of “swap.” The rule is intended to make clear that CFTC oversight of federally regulated derivatives markets does not intrude upon traditional state and tribal regulation of casino-style gambling. The IFR takes effect immediately upon publication in the Federal Register.
Under the IFR, an agreement, contract or transaction is excluded from the swap definition when both of the following conditions are met:
- Provider test: The agreement, contract or transaction must be offered or entered into by a person licensed or otherwise authorized under state or tribal law to offer gambling or gaming products or to accept wagers.
- Product test: The agreement, contract or transaction must not be traded on a board of trade, organized exchange, swap execution facility (SEF) or any other market where trades are executed multilaterally or are subject to individual negotiation. A contract traded on a DCM or SEF would not satisfy this test.
Notably, the exclusion is nonexclusive. Products that do not satisfy the two-part test may still be deemed to fall outside the definition of “swap” and would remain subject to a case-by-case analysis of the relevant facts and circumstances. The Commission gives two examples of gambling-style transactions that may fall outside the exclusion but still not be swaps: a casual bet between friends, and a sportsbook operating illegally in a state that prohibits gambling.
The IFR also explains the important differences between gambling products and swaps, which justifies their distinct regulatory treatment. Event contracts are traded on CFTC-registered exchanges at market-set prices via a central order book and are centrally cleared. Casino-style gambling products, by contrast, are typically bilateral, priced by the house and not centrally cleared.
Comments on the IFR must be submitted via Regulations.gov within 30 days after its publication in the Federal Register, or by November 18, 2026.
This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.