Comment Text:
The Washington Indian Gaming Association, on behalf of twenty-three federally recognized tribal governments, submits this comment in response to the Commodities Futures Trading Commission (“Commission”) Advance Notice of Proposed Rulemaking on event contracts.
This submission addresses a threshold question that governs the entire proceeding: whether contracts that function as wagering on the outcome of non-economic events fall within the scope of the Commodity Exchange Act (CEA) at all. Properly interpreted, they do not.
Congress established a binding limitation in CEA § 5c(c)(5)(C), 7 U.S.C. § 7a-2(c)(5)(C), identifying “gaming” as a category of contracts that may not be listed where contrary to the public interest. The Commission implemented that directive in 17 C.F.R. § 40.11, which provides in mandatory terms that a registered entity “shall not” list for trading or accept for clearing any contract that involves, relates to, or references gaming or activity unlawful under state or federal law. This is not a policy preference—it is an operative statutory and regulatory boundary.
The Commission should apply a clear and administrable rule of decision: a contract falls outside the permissible scope of Commission-regulated markets where (1) its value is determined by the outcome of a non-economic event, (2) participants lack bona fide underlying commercial exposure to hedge or manage, and (3) the contract functions in economic substance as wagering on that outcome. Where these conditions are present, the contract involves “gaming” within the meaning of § 5c(c)(5)(C) and is prohibited from listing under § 40.11.
Sports-related event contracts are the clearest example. They derive value from the outcome of contests, lack any bona fide hedging function, and operate as mechanisms for risking value on uncertain event outcomes. They do not facilitate price discovery tied to economic variables or manage commercial risk. In economic substance, they are wagering.
This conclusion does not turn on labels, platform design, or market structure. Characterizing a product as a “swap,” listing it on a registered exchange, or clearing it through a derivatives clearing organization does not transform wagering into a permissible derivative. Even if an event contract could be described using derivatives terminology, § 5c(c)(5)(C) and § 40.11 impose an independent and controlling limitation: contracts involving gaming may not be listed. Classification does not determine permissibility.
The Commission therefore need not—and should not—resolve the outer bounds of the statutory definition of “swap” to act in this proceeding. Existing law already supplies the governing rule. The appropriate course is to reaffirm that contracts involving gaming are prohibited, and to ensure consistent application of that rule through guidance and enforcement.
Any contrary interpretation would lack a limiting principle and would effectively authorize markets in wagering on virtually any non-economic event. Such an interpretation would raise serious concerns under the Administrative Procedure Act, 5 U.S.C. § 706, including arbitrary and capricious action if the Commission were to depart from its own regulations or prior reasoning without a reasoned explanation grounded in the statute.
It would also raise significant constitutional concerns. Interpreting the CEA to authorize nationwide markets in sports wagering or other non-economic event contracts would represent a major expansion of federal regulatory authority, requiring clear congressional authorization. No such authorization appears in the text or history of the Act.
Finally, the CEA does not displace state and tribal gambling laws or the comprehensive federal framework established by the Indian Gaming Regulatory Act, 25 U.S.C. § 2701 et seq. Federal jurisdiction attaches only to instruments that fall within the permissible scope of the Act; it does not arise from impermissible contracts. Reading the CEA to authorize gaming markets would improperly disrupt the balance of federal, state, and tribal authority without clear congressional direction.
In short, the question presented is not whether these products may have appeal, liquidity, or informational value. It is whether Congress authorized them. It did not.
The Washington Indian Gaming Association’s full comments are attached and incorporated by reference.
