U.S. prediction market rule proposal draws broad pushback

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U.S. prediction market rule pushback

Highlights

The CFTC proposal seeks to limit event contracts on prediction markets by banning wagers related to crime, terrorism, assassination, war, gaming, player injuries, and refereeing.
President Donald Trump and his administration are supporting the prediction market industry in court, claiming federal law protects registered markets from state interference.
Native American tribes, traditional casinos, and 20 state authorities argue that sports wagering on prediction markets constitutes illegal gambling best regulated locally, highlighting ongoing jurisdictional disputes.

CFTC proposal sets limits on event contracts

As reported by Reuters, the U.S. Commodity Futures Trading Commission is reviewing public comments on a proposal issued last month that would set moral boundaries for some prediction markets. These markets let users place yes-or-no wagers on events including sports, elections, economic outcomes and Wall Street indexes.

The CFTC is proposing to restrict bets tied to activities named in law, including crime, terrorism, assassination, war and gaming, arguing that some of these contracts may fall outside the public interest. At the same time, the framework generally allows sports wagering on platforms such as Kalshi and Polymarket to continue.

Under the proposal, markets based on scores, win-loss results and tournament advancement would likely remain acceptable. Contracts tied to player injuries, fighting, children's sports and refereeing would likely not be allowed.

Political and state-level opposition grows

President Donald Trump and his administration are broadly backing the prediction market industry, arguing in court fights across the country that federal law permits registered markets to offer event contracts and prevents state authorities from interfering.

That position is drawing resistance from critics who say the CFTC is moving beyond its intended role. Christopher Dodd, the former Democratic U.S. senator who co-sponsored the 2010 law giving the agency authority over swaps, says Congress did not intend for the regulator to become the nation's gambling overseer, while former CFTC Chairman Timothy Massad says the agency has lost sight of its mission and the limits of its authority.

Native American tribes, traditional casinos and local authorities in 20 states also argue that sports wagering on prediction markets amounts to illegal gambling that should remain under local control. Sports prediction markets are already blocked in places including Nevada and Michigan, and the CFTC faces no set deadline to issue a final rule as it considers the feedback.

In our earlier article on Kalshi’s Fed-related event contracts, we looked at how traders were pricing bets on whether Federal Reserve Chair Kevin Warsh would mention “oil” or a “shock” at an upcoming press conference amid shifting energy-market tensions. We also outlined how the brief spike in crude and uncertainty around inflation and rate pricing were feeding into expectations for the Fed’s next moves.

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