CFTC Proposes Its First Formal Prediction-Markets Rule to Vet Event Contracts on War, Gaming, and Unlawful Activity

The Commodity Futures Trading Commission published a Notice of Proposed Rulemaking on Wednesday seeking public comment on how to evaluate prediction-market event contracts, the agency’s first formal rule proposal aimed squarely at the fast-growing sector. The proposal amends CFTC Regulation 40.11 and adds a new Appendix F to Part 40.

The rule responds to rapid growth in the number and variety of event contracts listed by CFTC-registered exchanges, including contracts referencing sporting events. It would establish a structured framework for determining whether a given contract involves an activity enumerated in Section 5c(c)(5)(C) of the Commodity Exchange Act, namely terrorism, assassination, war, gaming, or conduct unlawful under federal or state law, and, if so, whether the contract is contrary to the public interest. The proposal sets out a 90-day review process with procedural protections and a set of public-interest factors the Commission would apply on a contract-by-contract basis, and it defines key statutory terms, including “involve” and “gaming.”

“The CFTC will protect the integrity of our regulated markets without standing in the way of responsible innovation,” said CFTC Chairman Michael Selig. “This proposal gives the Commission a durable, transparent framework to identify the contracts Congress directed us to scrutinize while letting legitimate markets move forward.”

The NPRM narrows one aspect of a broader Advance Notice of Proposed Rulemaking that the Commission published in March, which signaled new oversight for prediction markets as trading volumes surged. That earlier guidance urged exchanges to consult regulators before listing event contracts vulnerable to manipulation or insider trading, such as bets tied to specific athlete injuries.

The proposal lands during a period of unusually active CFTC engagement with crypto and event-contract markets. Earlier this month, the agency opened the door to US crypto perpetual futures with first approvals at Kalshi and Coinbase. The prediction-market sector has expanded rapidly, with platforms including Kalshi and Polymarket drawing record volumes, and the proposed framework would give the agency a clearer statutory basis to police the contracts that sit closest to the line Congress drew.

Related Listen: What Two DOJ Cases Reveal About the Legal Risks of Prediction Markets: Bits + Bips

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