Justice Department argues binary event contracts are swaps
The Department of Justice filed a brief in federal court arguing that binary event contracts are legally swaps, which would place them under Commodity Futures Trading Commission (CFTC) jurisdiction. The filing came in a case involving a Green Beret who traded such contracts. If courts accept the DOJ's position, many existing binary event products could become illegal if offered without proper CFTC registration. The classification would mark a major expansion of how federal commodities law treats event contracts.
The DOJ brief gives the CFTC a powerful ally in its fight to keep state gambling laws off federally registered platforms. Courts in Ohio and Tennessee have already pierced Kalshi's preemption shield, and New York is suing Polymarket on the same theory. A swap label from the judiciary would arm the CFTC with a cleaner statutory hook than its current event-contract framework.
Platforms like Kalshi and Polymarket now face legal pressure on three fronts: federal rule comments, state court defense, and the DOJ's new criminal-enforcement angle. The Green Beret case could move faster than the CFTC's own rulemaking, which sits at the White House for review. If the court accepts the DOJ's framing, state attorneys general lose their core argument that these contracts are unregulated gambling. The first federal judge to rule on the brief sets the template for every platform's defense.
The Justice Department's court filing adds a third federal branch to the swap-classification push that already includes the CFTC's pending rules and the Supreme Court petitions from New Jersey, Robinhood, and Crypto.com.