CFTC proposes rule for U.S. prediction market contract reviews

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CFTC prediction market review

Highlights

CFTC proposed its first rule on prediction markets, introducing a framework to evaluate contracts potentially breaching federal restrictions such as those involving war or terrorism.
The proposal outlines a 90-day public-interest review process for individual contracts, impacting operators like Kalshi, Polymarket, and Crypto.com by clarifying compliance expectations.
The rulemaking and public statements from officials underscore regulatory support for expanding event-based markets in the U.S., including through collaboration with sports leagues.

Framework for contract scrutiny

As reported by the Commodity Futures Trading Commission, the agency proposed its first rule for prediction markets on Wednesday, setting out an approach for broader evaluations of whether contracts breach federal restrictions on off-limits activity.

The measure addresses part of Chairman Mike Selig's wider push for a tailored regulatory regime for the sector. Selig says the CFTC aims to protect the integrity of regulated markets without blocking responsible innovation, adding that the proposal is meant to provide a durable and transparent framework for identifying contracts that Congress directed the commission to scrutinize while allowing legitimate markets to proceed.

Federal law says contracts involving war, terrorism, assassination, illegal activity and gaming can be treated as outside the public interest and barred. The platforms where event contracts trade operate as CFTC-regulated exchanges, and the agency says those exchanges serve as the first line of defence in determining whether contracts are lawful and whether markets are protected from manipulation or abuse.

Industry impact and policy direction

Prediction market operators including Kalshi, Polymarket and Crypto.com stand to be affected as the CFTC defines how it will review contracts across the sector. The proposal weighs a 90-day process for public-interest determinations on individual contracts, giving the industry a clearer, though still evolving, compliance pathway.

The rulemaking also signals continued official support for the growth of event-based markets in the U.S. In practice, the CFTC has shown openness to expanding activity in areas tied to sports through data-sharing agreements with professional leagues, while President Donald Trump recently backs Selig's direction by saying on social media that other countries are pursuing this new form of financial market and that the U.S. wants to remain at the top.

Our earlier report on Kalshi’s new compliance controls detailed how the prediction market operator began requiring employment verification to screen for potential insiders before they can trade. We also noted the rollout of added surveillance measures such as risk-scoring for new markets and an expanded whistleblower process, as regulatory pressure on prediction markets continues to build in the U.S.

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