CFTC seeks comment on event contract rule changes for regulated markets

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CFTC event contract rule changes

Highlights

The CFTC published a Notice of Proposed Rulemaking seeking comment on amendments to Regulation 40.11 and adding Appendix F to part 40, targeting event contracts.
Proposed changes introduce a structured 90-day review process to assess whether event contracts involve activities like terrorism, assassination, war, or unlawful conduct.
This rulemaking builds on a March Advanced Notice about prediction markets, signaling the CFTC may undertake further related regulatory action.

Proposed framework for event contracts

As reported by the Commodity Futures Trading Commission, the agency has published a Notice of Proposed Rulemaking that seeks public comment on amendments to CFTC Regulation 40.11 and the addition of Appendix F to part 40. The proposal comes as the Commission continues to observe growth in both the number and variety of event contracts listed for trading by CFTC-registered entities.

The proposed changes create a structured process for evaluating whether contracts involve activities enumerated in Section 5c(c)(5)(C) of the Commodity Exchange Act. Those activities include terrorism, assassination, war, gaming, or conduct that is unlawful under federal or state law, and the framework also addresses whether such contracts are contrary to the public interest.

CFTC Chairman Michael S. Selig says the agency aims to protect the integrity of regulated markets without blocking responsible innovation. He says the proposal is designed to provide a durable and transparent framework for identifying contracts that Congress directed the Commission to scrutinize while allowing legitimate markets to move forward.

Review process and market implications

The proposal sets out a 90-day review process intended to provide procedural protections and a set of public interest factors that the Commission would apply on a contract-by-contract basis. It also defines key statutory terms, including “involve” and “gaming,” which are central to the agency's review of event-based products.

The rulemaking follows an Advanced Notice of Proposed Rulemaking on prediction markets that the Commission published in March. The CFTC says this latest proposal is narrowly tailored to address one aspect of that earlier process, while signaling that the broader prediction market review may still lead to further rulemaking.

Our earlier article on Kalshi’s new trading checks explained how the prediction market operator is tightening its compliance program amid rising U.S. scrutiny. We noted that Kalshi is introducing employment verification to flag potential insiders, alongside added surveillance tools such as risk-scoring for new markets and an expanded whistleblower process.

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