The Commodity Futures Trading Commission is moving from guidance to formal rulemaking, publishing proposed amendments to rules for prediction market operators on Wednesday.
The proposed rules lay out a menu of potential prediction markets regulations and opens a 45-day public comment period once the Federal Register publishes them. During the comment period, the CFTC is asking whether prediction markets input on a variety of potential rules. The proposed rule making document is 267 pages.
The agency also wants input on how existing exchange core principles should apply to prediction markets. Additionally, it seeks input on whether blockchain-based platforms need separate rules.
“The CFTC will protect the integrity of our regulated markets without standing in the way of responsible innovation,” CFTC Chairman Michael S. Selig said in a release. “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 move comes as the CFTC presses ahead with prediction market oversight despite congressional pushes to limit its authority over political and sports forecasting markets.
Prediction market rules
The CFTC defines gaming for the first time in the Commodity Exchange Act and determined it fits within CFTC jurisdiction.
“Gaming means any activity that: i) one or more participants typically engage in for purposes of recreation or to entertain others; (ii) is governed by rules; and (iii) includes measurable occurrences or outcomes that depend on the participants’ luck, skill, or athletic ability during the activity.“
Sports contracts fit under that definition, including:
- Who wins
- Final scores
- Point differentials
- Tournament advancement
- Individual or team statistical performance
It notes four categories outside of public interest:
- Player injuries
- Officiating outcomes
- Micro-bets
- Pre-collegiate sports
Key proposed prediction markets framework elements
The CFTC’s request centers on five main policy questions the CFTC wants the industry and public to address:
- Margin trading
- Insider information
- Public-interest bans
- Core principles
- Blockchain markets
The agency is particularly focused on whether existing CEA principles are sufficient or whether new regulations are needed to address unique risks in prediction markets.
Big issues at stake
The CFTC seeks guidance on whether markets should offer leveraged trading and under what conditions. Similarly, it seeks whether or not markets that could be subject to improperly obtained information.
It also looks for input on contracts that should be prohibited, including:
- War
- Terrorism
- Assassination
- Unlawful conduct
Timeline and next steps
Interested parties will have a 45-day comment period after Federal Register publication. That will give industry participants, traders and advocacy groups a window to submit input before the CFTC drafts final rules.
Wednesday’s draft does not create binding rules or regulations.
It opens a formal rule-making process the agency will use to decide whether to draft and adopt new regulations.
Building on previous CFTC action
The CFTC’s request follows a series of rule making declarations this year. In January, Selig said the agency was ready to “modernize, harmonize and clarify” event contract rules.
In March, he CFTC issued guidance and an Advance Notice of Proposed Rulemaking asking for comment on whether to regulate prediction markets more tightly, with comments due April 30. The same month, the CFTC issued new sports guidelines that put the responsibility on exchanges to police inappropriate event contracts.
In April, the Coalition for Prediction Markets submitted comments arguing the swaps definition is “broad enough” to include sports.
The new request represents the agency’s shift from asking general questions to laying out specific policy options it could adopt.
What this means for operators
For platforms like Kalshi, Polymarket and other prediction market platforms, Wednesday signals the CFTC is preparing a clearer regulatory framework, but one that could impose tighter guardrails.
The agency’s framing suggests future rules may focus on manipulation risk, insider-information problems, market surveillance, and the line between allowed forecasting products and prohibited event contracts.
The process runs concurrent to dozens of lawsuits between the state regulators and the CFTC and Kalshi and other operators over the regulatory jurisdiction of prediction markets.
