CFTC proposes new rules for prediction markets
The Commodity Futures Trading Commission has introduced a 267-page proposal outlining which prediction market contracts would be allowed under U.S. law, aiming to clarify a fast-growing sector now handling tens of billions of dollars in trading volume.
The framework would permit platforms tied to sports outcomes to continue operating, while restricting contracts linked to war, terrorism, and assassinations. The agency said the goal is to protect market integrity while allowing lawful innovation to continue.
Clearer boundaries on controversial contracts
Under the proposal, bets tied to violent or high-risk geopolitical events would be prohibited. For example, contracts involving an armed attack by a designated terrorist group would fall under restricted categories.
However, not all security-related topics would be banned. Contracts tied to administrative or policy changes, such as new airport screening measures, would remain permissible because they are not directly classified as terrorism-related.
This marks a shift from earlier efforts that broadly sought to limit event-based contracts tied to politics, war, and terrorism. Those earlier attempts were withdrawn, making way for a more structured and detailed approach.
Rapid growth draws regulatory scrutiny
Prediction markets—where traders speculate on outcomes like elections, tariffs, or entertainment events—have expanded rapidly since the 2024 U.S. elections. Monthly trading volume on the two largest platforms climbed from under $5 billion in September 2025 to about $24 billion by April 2026.
Globally, volumes rose from roughly $16 billion in 2024 to nearly $64 billion in 2025, highlighting the sector’s rapid expansion and the increased attention from regulators.
Authorities have raised concerns about manipulation and misuse of non-public information. In April, the Justice Department arrested an active-duty U.S. Army soldier accused of placing informed trades tied to the capture of former Venezuelan President Nicolás Maduro. Investigations are also ongoing into former congressman George Santos over trades connected to his attendance at the State of the Union.
Sports markets seen as lower risk
The CFTC signaled that sports-related contracts are unlikely to raise major public interest concerns. According to the proposal, these markets tend to have characteristics that reduce the risk of regulatory conflict, making them easier to approve under the new framework.
The rules introduce a tiered approach, where lower-risk contracts—such as those tied to athletic events—would face fewer hurdles, while contracts involving broader societal or geopolitical issues would require deeper scrutiny.
Push for federal oversight
CFTC Chair Michael Selig has emphasized the agency’s role as the primary federal regulator for prediction markets, at times clashing with state-level gaming authorities. He said the new rules are designed to identify which contracts require heightened review while allowing compliant platforms to continue operating.
The proposal follows earlier guidance issued in March requiring registered platforms to ensure contracts cannot be easily manipulated. Exchanges are expected to act as frontline regulators, monitoring trading activity and ensuring compliance.
Political backing has reinforced the agency’s position. President Donald Trump has supported the CFTC’s jurisdiction, while Donald Trump Jr. has financial ties to several prediction market platforms through venture investments.
Path to compliance for platforms
The new framework could provide clearer guidance for operators, including blockchain-based platforms that previously faced enforcement actions. Polymarket, for example, paid a $1.4 million penalty in 2022 for offering unregistered contracts.
By defining which products are permissible, the CFTC aims to reduce ambiguity and prevent future violations.
More rules expected
Selig indicated that additional rulemaking is likely as the agency continues to refine its oversight of prediction markets.
For traders, the proposed rules would reshape available opportunities, steering activity toward sports and economic indicators while limiting speculation tied to violent or politically sensitive events. At the same time, recent enforcement actions suggest regulators are increasing surveillance of trading behavior across both domestic and international platforms.
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