CFTC Proposes First U.S. Rules for Prediction Markets as Industry Expands

The U.S. Commodity Futures Trading Commission (CFTC) has introduced its first proposed regulation for prediction markets, marking a major step toward creating a clear framework for one of the fastest-growing areas of financial trading.

CFTC Seeks Clear Framework for Prediction Markets

The proposal outlines how the agency would review event based contracts to determine whether they meet the legal standard of serving the public interest. The move comes as prediction market platforms continue to gain popularity, particularly in sports, politics and economic forecasting.

CFTC Chairman Mike Selig said the proposal is designed to provide a transparent and long-term regulatory framework that allows innovation while protecting market integrity.

Under current federal law, contracts related to war, terrorism, assassination, illegal activities and certain forms of gaming can be considered contrary to the public interest and prohibited.

New Review Process for Event Contracts

The proposed rule would establish a 90-day review process for evaluating contracts. Regulators would apply a three-step test before restricting a market. First, the contract must be tied to a specific event. Second, it must involve a category that could raise public-interest concerns. Third, the commission would need to formally determine that the contract is not in the public interest.

The proposal also provides practical examples. For instance, a contract tracking crude oil shipments through the Strait of Hormuz would not automatically be considered related to war or terrorism because it measures commercial activity rather than military events.

Sports Prediction Markets Receive Support

One of the most notable aspects of the proposal is its support for sports-related event contracts. The CFTC indicated that markets based on game results, final scores, tournament outcomes, team performance and season statistics may provide valuable price discovery and information to market participants.

The agency suggested that contracts with economic or commercial value are less likely to be viewed as harmful to the public interest. In contrast, markets that offer little informational benefit could face greater scrutiny.

Regulatory Uncertainty Remains

The proposal is now open for public comment before any final rule is adopted. If approved, the regulation would take effect within 60 days of completion.

The development comes as prediction market platforms such as Kalshi, Polymarket and Crypto.com continue expanding. However, questions remain about the CFTC’s ability to advance major policy decisions, as the commission is currently operating with only Chairman Mike Selig and no additional confirmed commissioners.