Why Casino-Style Games and Slots Won’t Be Hitting Prediction Markets

Prediction markets allow traders to buy and sell shares tied to outcomes across a wide range of topics, from the winner of a Thursday Night Football game to what CNN anchor Kaitlan Collins might say on air.

With critics warning that these financial platforms could venture into casino-like products, the Commodity Futures Trading Commission (CFTC) has submitted for review two rules aimed at keeping slots and table games off the platforms while affirming their right to offer sports-related event contracts.

The CFTC recently submitted two proposals to the White House’s Office of Information and Regulatory Affairs (OIRA). The first is a proposed “interim final rule” titled, “Further definition of ‘swap’ to exclude casino-style gambling products.”

Labeling the suggested regulation as “interim final” would allow the rule to become effective immediately. The scarcely used path requires a federal agency to show good cause in arguing that the rule is urgently needed.

The proposed rule is thought to prohibit casino-style games like digital slots and interactive table games from prediction markets regulated by the CFTC.

CFTC Draws Line at Casino Gaming

Critics have frequently argued that if the CFTC considers sporting events viable financial underlying assets, little would prevent prediction markets from introducing pure games of chance.

If traders can buy contracts on who scores the first touchdown in a football game, opponents ask, what prevents platforms from offering contracts on whether the next roulette spin lands on red, or if a blackjack hand totals 18 or higher?

The CFTC’s filing signals that the federal regulator wants to assure state authorities and commercial gaming operators that it does not intend to authorize traditional casino gambling.

While the official text remains under OIRA review, prominent gaming attorney Daniel Wallach noted that OIRA clearance is a standard “procedural step that precedes public release.”

The second CFTC proposal is titled “Further definition of ‘swap’ to include event contracts.” That rule is expected to update the statutory definition of a swap to cover event contracts tied to sports, pop culture, and non-financial real-world outcomes.

For decades, prediction markets primarily served as speculative hedging tools for agricultural and energy commodities. Only recently have retail-focused exchanges shifted toward broader consumer event trading.

Cases Continued

Federal courts have recently questioned the CFTC’s claim that it has the “exclusive jurisdiction” over prediction markets and what they can offer for trading.

Recent judicial rulings have questioned whether sports event contracts qualify as traditional financial swaps and whether state gaming regulators retain the authority to enforce local gambling laws against exchange platforms.

The U.S. Supreme Court has also been asked to clarify the scope of the CFTC’s oversight. There is currently no definitive timeline on when the high court will decide whether to take up the case.