The Commodity Futures Trading Commission (CFTC) has submitted two proposals regarding event contracts to the White House Office of Information and Regulatory Affairs for review. Neither proposal is classified as economically significant, and details have not yet been publicly disclosed.
These proposals seek to clarify which types of event contracts fall under the CFTC's jurisdiction while ensuring they are clearly differentiated from traditional gambling products associated with casinos.
The first proposal, identified as RIN 3038-AF82, intends to modify the existing definition of swaps to explicitly encompass event contracts, including "yes/no" trades found in prediction markets. Public testimony will be taken before this rule is finalized.
The second proposal, an interim final rule known as RIN 3038-AF81, aims to introduce a definition of "casino-style gambling products" within the swap definition framework. This rule could potentially be enacted immediately post-approval, following the acceptance of public comments.
On September 22, the CFTC’s Division of Market Oversight issued an advisory concerning mention markets, which are contracts contingent upon specific pre-defined words being uttered by an individual.
This regulatory development is particularly pertinent as there is an increase in state and court lawsuits challenging the regulation of prediction markets. These cases are currently awaiting a decision from the Supreme Court.
