The US Commodity Futures Trading Commission issued its first prediction-market rule proposal on June 10, signaling it would broadly permit sports event contracts while restricting wagers on outcomes vulnerable to manipulation. The proposal aims to balance regulatory oversight with market growth, according to CFTC Chairman Mike Selig. Prediction markets have faced years of regulatory uncertainty, and this rule proposal seeks to clarify permissible contract types for platforms operating in the space.
CFTC Permits Sports Contracts on Aggregate Outcomes
Under the notice of proposed rulemaking, sports contracts that settle on aggregate outcomes would be presumptively permissible. Contracts tied to final scores, win-loss records, and season-long outcomes fall within this category. The proposal could strengthen the regulatory footing of platforms such as Kalshi and Polymarket.
CFTC Restricts Contracts on Manipulable Events
Contracts on player injuries, officiating decisions, and single plays would be restricted as too manipulable. The regulator considers these granular events unlikely to meet its public-interest test. Gary Kalbaugh, partner at Cahill Gordon & Reindel LLP, noted that "gaming is defined more broadly than anticipated and sweeps in sports events."
CFTC Clarifies Election Contracts as Non-Gaming
The proposal clarified that election prediction contracts are not considered "gaming" under federal law. This distinction strengthens the legal standing of political markets that have faced years of regulatory uncertainty.
CFTC Opens Public Comment Period on Proposal
The rules are not yet final and remain open to a public comment period. A group of Democratic lawmakers has separately urged the CFTC to curb insider trading and prohibit certain event contracts. CFTC Chairman Mike Selig stated, "The CFTC will protect the integrity of our regulated markets without standing in the way of responsible innovation."
FAQ
What did the CFTC propose on June 10?
The CFTC issued its first prediction-market rule proposal on June 10, permitting sports contracts on aggregate outcomes such as final scores, win-loss records, and season-long results, while restricting contracts on manipulable events like player injuries and single plays.
Why did the CFTC clarify election contracts as non-gaming?
The CFTC clarified that election prediction contracts are not considered "gaming" under federal law to strengthen the legal standing of political markets that have faced regulatory uncertainty.
What happens next with the CFTC proposal?
The proposal remains open to a public comment period before being finalized. Democratic lawmakers have urged the CFTC to curb insider trading and prohibit certain event contracts during this review phase.
