Eric Dinallo, the New York regulator who oversees insurers, said credit default swaps resemble insurance products and are "more dangerous" than gambling.
The swaps, which protect investors in case a bond issuer cannot pay its debts, have "all the hallmarks of an insurance contract," Mr. Dinallo said Friday at a New York Assembly hearing.
Sales of the swaps have been blamed for contributing to the global financial crisis and the collapse of American International Group Inc., which averted bankruptcy by accepting a government rescue package.
"We still, to this day, do not know how much in credit default swaps is out there" in the overall market, Mr. Dinallo said.
Last month he said that New York would delay rules that would have deemed some of the contracts insurance and forced the sellers to be licensed. Dealers and investors have contended that imposing such rules on some transactions and not others would drive traders to set up shop in other states.