The Commodity Futures Trading Commission (CFTC) has advanced two sets of regulations related to event contracts, which are now under review by the White House Office of Information and Regulatory Affairs. These proposals are deemed economically insignificant and have yet to be published.
The goal of these regulations is to delineate the types of event contracts that fall within the CFTC's jurisdiction and to differentiate them from gambling products typically found in casinos.
The first proposal, designated as rule RIN 3038-AF82, seeks to revise the existing definition of swaps to explicitly encompass event contracts, such as "yes/no" trades occurring in prediction markets. This rule will undergo public testimony before it is finalized.
The second proposal, labeled RIN 3038-AF81, is an interim final rule that aims to incorporate a definition of "casino-style gambling products" into the existing definition of swaps. Unlike the first rule, this one could be implemented immediately after receiving approval and public comment.
On September 22, the CFTC's Division of Market Oversight issued an advisory concerning mention markets, where contracts depend on specific words being spoken by designated individuals.
The CFTC's initiative to clarify its regulatory authority comes amid increasing lawsuits from states and courts regarding the regulation of prediction markets, particularly as the Supreme Court is expected to provide a ruling on this matter soon.
