The Commodity Futures Trading Commission (CFTC) is advancing two sets of proposed rules regarding event contracts, which have been submitted for review by the White House's Office of Information and Regulatory Affairs. These proposals are not classified as economically significant and have not yet been made public.
The goal is to clarify which types of event contracts come under the CFTC's jurisdiction and to differentiate them from products associated with casino gambling. The first proposed rule, identified as RIN 3038-AF82, aims to modify the existing definition of swaps to explicitly include event contracts, such as "yes/no" trades in prediction markets. Before this rule can be finalized, it will be open to public testimony.
The second proposed rule, an interim final rule numbered RIN 3038-AF81, seeks to introduce a definition of “casino-style gambling products” within the swaps framework. This rule could potentially be enacted immediately upon approval and after gathering public comments, distinguishing it from the first proposal.
On September 22, the CFTC's Division of Market Oversight issued an advisory regarding mention markets, which are contracts that hinge on specific keywords uttered by designated individuals.
The CFTC's initiative to outline its regulatory authority comes at a time of increasing state and court challenges regarding the regulation of prediction markets, with numerous lawsuits pending as they await a Supreme Court ruling on the matter.
