The Commodity Futures Trading Commission has issued new guidance for prediction markets, asking exchanges to engage with regulators before listing contracts that may be vulnerable to manipulation and insider trading, while also launching a rulemaking process that could block markets tied to assassination, war, or terrorism if deemed contrary to the public interest.
The March 12, 2026 guidance represents the agency’s first formal response to controversies surrounding prediction markets, which have exploded in popularity amid geopolitical events including the ongoing Iran conflict.
New Guidance and Self-Certification Process
Heightened Scrutiny for Vulnerable Contracts
The CFTC guidance instructs exchanges to consider whether certain categories of event contracts create a “heightened potential for manipulation or price distortion” and to “engage with staff in the early phases of designing such contracts.” This marks a shift from the longstanding self-certification process that has allowed exchanges to introduce new financial contracts without explicit regulatory signoff.
While exchanges may continue using self-certification, the CFTC encourages proactive engagement, particularly for markets that could attract insider trading or manipulation. The guidance responds to complaints from more established exchanges that prediction markets have exploited the self-certification process to rapidly expand into novel areas.
Advance Notice of Proposed Rulemaking
The agency also issued an advance notice of proposed rules that poses dozens of questions about how it might modify existing regulations for prediction markets. This early-stage effort seeks public feedback that can be incorporated into formal rulemaking, signaling the CFTC’s intent to establish a comprehensive framework for the growing sector.
CFTC Chairman Michael Selig stated that the action “begins the process of new rulemaking grounded in a rational and coherent interpretation of the Commodity Exchange Act, while reassuring the American people that the CFTC will exercise its exclusive jurisdiction over prediction markets.”
Political Context and Industry Growth
Trump Family Connections
The guidance arrives as prediction markets have drawn attention due to their connections to the Trump family. Donald Trump Jr. serves as an adviser to the two most prominent prediction market startups, Kalshi and Polymarket. Additionally, Trump Media & Technology Group is creating its own prediction market product in partnership with Crypto.com, which operates OG, a prominent sports trading platform.
Explosive Industry Growth
The CFTC noted that the number of exchange applicants has more than doubled over the past year, primarily from companies seeking to operate prediction markets. Many applicants plan to focus on sports trading, an area that has come under scrutiny due to previous sports gambling scandals.
The industry’s rapid expansion has attracted legal challenges from state regulators, who argue that sports-based prediction markets should answer to state gambling laws. Selig has signaled he will defend federal jurisdiction, stating in February: “To those who seek to challenge our authority in this space, let me be clear: We will see you in court.”
War and Assassination Contracts Under Review
Iran Conflict Markets
The nascent industry has recently faced particular scrutiny for contracts tied to the war in Iran, including some focused on the removal of Ayatollah Ali Khamenei. These markets raised concerns about whether betting on military actions and leadership changes could incentivize conflict or reward access to classified information.
Public Interest Standard
The CFTC’s announcement indicates it may block contracts tied to assassination, war, or terrorism if it determines such event contracts are “contrary to the public interest.” However, the document stops short of prohibiting these markets outright, suggesting the agency will evaluate them on a case-by-case basis.
Selig has previously emphasized that the CFTC “does not allow event contracts that are illegal or that involve terror, assassination, or war.” The new guidance reinforces this position while providing a framework for determining when such contracts cross the public interest line.
Sports Betting Integration and Oversight
Sports Contract Guidelines
The guidance suggests sports contracts can proceed, but encourages exchanges to engage with sports leagues on oversight of potential insider trading and to cooperate with pending investigations. This recommendation reflects awareness of recent public concerns that insiders could abuse the unique characteristics of these contracts.
Rob Schwartz, a former CFTC general counsel now at Morgan, Lewis & Bockius, noted that the recommendation to consult with sports leagues “shows full awareness of recent public concerns that insiders or other market participants may abuse the unique characteristics of these contracts.”
Industry Response
Crypto.com launched the first sports prediction markets in late 2024 following a court ruling that paved the way for trading on the 2024 presidential elections. The company did not engage with CFTC staff before launching contracts on the 2025 Super Bowl, a practice the new guidance seeks to address.
Kalshi followed suit soon after with its own sports offerings. Polymarket, which has long operated an unregulated overseas exchange offering sports trading, acquired licenses last year to launch a U.S.-regulated exchange currently focused solely on sports.
A Kalshi spokesperson stated: “We’re currently reviewing the CFTC’s proposals. We look forward to working with regulators and policymakers on both sides of the aisle to keep these markets fair and safe.” Crypto.com and Polymarket did not respond to requests for comment.
Legal and Regulatory Framework
CFTC Jurisdiction
The guidance reaffirms the CFTC’s position that it maintains “exclusive jurisdiction” over prediction markets under the Commodity Exchange Act. This assertion comes amid ongoing legal battles with state regulators who seek to assert gambling oversight authority.
The agency has faced recent legal challenges from states including Nevada, which have argued that sports-based prediction markets fall under state gaming laws. Selig has indicated he will vigorously defend federal jurisdiction in these disputes.
Self-Certification Evolution
The self-certification process, which has allowed prediction markets to rapidly expand, will continue but with increased oversight expectations. The CFTC’s guidance encourages exchanges to voluntarily engage with staff before launching contracts that could present manipulation risks, suggesting a move toward more proactive regulation without eliminating the self-certification pathway entirely.
FAQ: CFTC Prediction Market Guidance
Q: What does the new CFTC guidance require of prediction markets?
A: The guidance encourages exchanges to engage with CFTC staff early when designing contracts that may be vulnerable to manipulation or insider trading. While the self-certification process remains available, exchanges are urged to consider whether certain event categories create heightened risk and to consult with relevant parties such as sports leagues.
Q: Will the CFTC ban war and assassination markets?
A: The CFTC may block contracts tied to assassination, war, or terrorism if determined to be “contrary to the public interest.” However, the guidance does not impose an outright prohibition, suggesting case-by-case evaluation. Chairman Selig has previously stated the agency does not allow contracts involving terror, assassination, or war.
Q: How does this guidance affect sports betting on prediction platforms?
A: Sports contracts can proceed, but exchanges are encouraged to engage with sports leagues on insider trading oversight and cooperate with investigations. This responds to concerns about potential abuse of these markets by insiders with non-public information.
Q: Why is the CFTC issuing this guidance now?
A: The number of exchange applicants has more than doubled in the past year, primarily from companies seeking to operate prediction markets. Recent controversies over Iran war contracts and questions about insider trading have also highlighted the need for clearer regulatory frameworks.
