CFTC Proposes Explicit Swap Treatment for Event Contracts
On October 19, 2026, the CFTC published two regulatory actions addressing event contracts: a proposal to expressly include specified event contracts in the definition of a swap, and an interim final rule excluding qualifying casino-style gambling products. The proposal is not final, while the exclusion is already effective. The CFTC already asserts authority to address fraud and insider trading involving event contracts within its jurisdiction, so firms should consider assessing their existing exposure rather than wait for the proposal to be finalized.
Key takeaways
- The proposed rule would expressly include event contracts based on sports, politics, culture, and weather in the swap definition, reinforcing the CFTC’s existing interpretation.
- The interim final rule excludes casino-style gambling products from the swap definition. It is final but open for comment.
- Swap classification brings CFTC anti-fraud and insider trading authority into focus for employee conduct.
- Policies should identify applicable confidentiality duties and explain how restrictions on using material nonpublic information (MNPI) apply to event contracts.
- Comments on both rules are due November 18, 2026.
What the CFTC published
The proposed rule (91 FR 66022) would add event contracts to the regulatory definition of a swap. The CFTC cites a split among federal appeals courts: the Third Circuit found sports event contracts are swaps, while the Ninth and Sixth Circuits found they likely are not.
The interim final rule (91 FR 65969), effective October 19, 2026, codifies the CFTC’s position that qualifying casino-style gambling products, including sportsbook wagers, are excluded from the swap definition. The exclusion applies to products offered within State or Tribal authorization that also meet the rule’s trading-structure conditions.
Both documents are open for public comment through November 18, 2026.
Why swap classification matters for compliance
Panelists at a recent SIFMA's prediction markets discussion, including a CFTC enforcement official, said event contracts are swaps and that insider trading rules apply to them. As described, liability turns on misappropriation: using confidential information in breach of a duty owed to its source. Possessing nonpublic information does not automatically make trading unlawful. The source of the information, applicable duties, and how the information was obtained and used matter.
“Our position is that we are the primary regulator in these markets, and we will actively police them. We’re here to help ensure their growth, but also to be a cop on the beat and police fraud.“
For compliance teams, that makes two questions critical: what information could be material to an event contract, and who owes a duty to protect it through employment, consulting, confidentiality agreements, or other obligations. Panelists also noted that regulators often ask for policies and training during investigations, and that publicly pseudonymous platform accounts can make employee activity hard to identify.
New questions for registrants and existing firms
Firms offering or facilitating event contract trading should assess the supervision, surveillance, and operational requirements applicable to their registration and activities. Other financial services firms may face employee conduct and confidential-information risks even if they do not offer these products. For those firms, the practical question is whether existing personal trading and information protection policies adequately address employee participation in prediction markets.
Signs it's worth reassessing your compliance readiness
Event contract risk can sit outside the scope of existing compliance controls. Your program may need a closer look if any of the following apply:
- If your policies define MNPI only in terms of securities or issuers
- If roles outside trading, such as legal, government affairs, and communications, are not part of your risk assessment
- If your surveillance has no escalation path for activity outside business hours
- If you have no documented process for responding to a regulator inquiry about employee event contract activity
Five actions compliance teams can take now
These build on the best practices in our earlier post, What Prediction Markets Mean for Compliance Oversight, with new priorities.
Map exposure beyond the trading desk
Inventory who could access information relevant to event outcomes, including legal, operations, and executive teams.
Identify confidentiality duties and relevant information
Identify existing employment, consulting, contractual, and other confidentiality duties. Explain what information could be material to an event contract and how employees must handle it.
Name event contracts in policy
Reference prediction markets explicitly in relevant policies. Determine whether account disclosure, preclearance, restrictions, or attestations are appropriate for the firm’s risks. Explain the policy through examples relevant to employees’ roles, and obtain acknowledgments when expectations change.
Extend detection
Communications can show who had access to information, when they received it, and whether it was shared before a trade. Assess whether your existing communications surveillance scenarios cover relevant platform names, event topics, and potential tipping.
Document gaps in visibility into employees’ personal trading, and establish an escalation approach suited to the firm’s risks, including activity outside business hours.
Build the response plan
Establish escalation triggers, investigation responsibilities, and disciplinary procedures, along with a process for assessing applicable reporting obligations with Legal.
Preparing for what comes next
The proposal may change before it is final, so firms should monitor the rulemaking while addressing identified gaps in existing controls. What firms can do today is clarify duty, MNPI, and ownership of this risk so their frameworks hold up either way.
Take action today to reveal your communications blind spots. See how Smarsh helps you capture and supervise communications across channels.
Frequently asked questions
No. The CFTC’s proposal to expressly include specified event contracts in the swap definition (91 FR 66022) is open for comment through November 18, 2026. The proposal may change before the CFTC adopts a final rule, so firms can monitor the rulemaking while they address gaps in their existing controls.
Yes. The interim final rule (91 FR 65969) took effect October 19, 2026, and excludes qualifying casino-style gambling products, including sportsbook wagers, from the swap definition. The exclusion covers products offered within State or Tribal authorization that also meet the rule’s trading-structure conditions. The CFTC is accepting comments on the rule through November 18, 2026.
Possibly. Employee conduct and information misuse risks can arise regardless of registration, even at firms that do not offer event contracts. The practical question is whether existing personal trading and information protection policies address employee participation in prediction markets. Firms can confirm their exposure with counsel.
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