CFTC proposes framework for prediction markets, bars contracts tied to terrorism and assassinations

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CFTC prediction markets framework

Highlights

The CFTC proposed its first rules for supervising prediction markets, barring contracts tied to terrorism, assassinations, war, gaming, or illegal conduct under the Commodity Exchange Act.
The proposal does not categorically ban sports or election contracts, instead outlining criteria for identifying prohibited event contracts and launching a public comment period.
The CFTC asserts exclusive authority over prediction markets by classifying all event contracts as swaps, despite ongoing jurisdictional disputes with states over sports-related platforms.

Regulatory framework and prohibited categories

As reported by CNBC, the Commodity Futures Trading Commission on Wednesday issues its first proposed rules for supervising prediction markets and outlines how it plans to determine whether event contracts are illegal or contrary to the public interest.

The proposal centers on contracts linked to terrorism, assassinations, war, gaming or conduct that is illegal under state or federal law under the Commodity Exchange Act. The commission does not impose an outright ban based solely on broad categories such as sports or elections, but instead focuses on how it will assess whether a contract crosses into prohibited territory.

In its release, the commission says the latest proposal remains limited and signals that additional rulemaking on prediction markets may follow. The measure now moves into a public comment period.

CFTC Chairman Michael Selig says in a statement that the agency will protect the integrity of regulated markets without blocking responsible innovation. He says the proposal is intended to create a durable and transparent framework for identifying contracts that Congress directed the commission to scrutinize while allowing legitimate markets to proceed.

Jurisdiction dispute and market impact

Prediction markets have surged in popularity over the past year, increasing pressure on regulators to define how the products should be treated under U.S. law. The proposal leaves some grey area around gaming, a particularly contentious issue because sports-related event contracts have triggered disputes over whether they function as betting products.

States challenge some platforms on the basis that sports-related offerings fall under state betting authority. The CFTC, however, argues that all such contracts are swaps regardless of subject matter, giving the federal agency exclusive regulatory authority.

Bipartisan members of Congress also raise concerns about the platforms and the possibility of insider trading risks. Even so, no formal legislation addressing prediction markets has yet been taken up.

Our earlier coverage of the 2026 FIFA World Cup betting buildup examined how prediction markets such as Kalshi and Polymarket are expanding access to match-related event contracts alongside traditional sportsbooks. We noted that the surge in trading activity is intensifying regulatory friction, with several states challenging sports-linked contracts while the CFTC maintains it has exclusive jurisdiction over these products.

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