The Commodity Futures Trading Commission has unveiled a proposed regulation for prediction markets, inviting public feedback on an approach to assess whether contracts align with the ‘public interest.’ What to know:
— The U.S. Commodity Futures Trading Commission has released its inaugural notice of proposed rulemaking regarding prediction markets, proposing a framework for reviewing whether contracts serve the public interest.
— The CFTC aims to establish a clear regulatory stance to support the industry’s ongoing expansion, which has garnered significant attention for its sports and political betting activities.
On Wednesday, the U.S. Commodity Futures Trading Commission introduced its first regulatory proposal for prediction markets, outlining a method for evaluating if contracts meet federal standards for legality.
The regulatory body overseeing U.S. derivatives has been a proponent of prediction markets operated by companies like Kalshi, Polymarket, and Crypto.com, with Chairman Mike Selig prioritizing them in legal and regulatory discussions. He has committed to creating a specific regulatory framework for the sector, and this new proposal represents part of what could be a series of regulations pursued by the agency.
«The CFTC will safeguard the integrity of our regulated markets while fostering responsible innovation,» Selig stated. «This proposal provides the commission with a robust, transparent structure to identify contracts that Congress has tasked us to examine, while allowing legitimate markets to advance.»
According to federal law, contracts related to war, terrorism, assassination, illegal actions, and gaming may be classified as outside the public interest and thus prohibited. The CFTC has recently embraced data-sharing arrangements with professional sports leagues, indicating its support for the rapidly expanding sports betting sector as a matter of public interest, and the new proposal continues this trend.
The platforms where event contracts are traded are regulated exchanges under the CFTC, which has asserted that these exchanges serve as the first defense in determining the legality of contracts and preventing market manipulation or abuse.
The proposal, which will accept public comments before being revised and finalized, proposes a 90-day review process for public-interest evaluations of individual contracts.
Before banning contracts, the agency would apply a three-part test. First, the contracts must be based on a real event, then they must fall into one of the categories that could render them contrary to the public interest, and lastly, the commission must formally determine that the contracts do not serve the public interest.
An example provided in the proposal illustrated what would not fall under the war or terrorism categories:
«An event contract that settles on whether a specified volume of crude oil transits the Strait of Hormuz during a specified period does not involve war or terrorism, even though the oil flow could be affected by military conditions, because the settlement determining occurrence is based on commercial shipping activity rather than a war or terrorism event,» it stated.
Regarding the criteria for determining whether something contradicts the interests of the U.S. public, the CFTC is favoring a multi-faceted approach rather than a simple test.
«A multi-factor approach allows the commission to evaluate various aspects of potential harm or public benefit — including the event contract’s hedging or price-basing utility or likelihood of promoting illicit behavior — while also accommodating innovative event contract designs and market evolution,» the proposal noted.
The proposal, which could take effect within 60 days of completion, advocates for the protection of the increasingly popular sports betting market, now a staple of television advertising.
«The extent to which event contracts settle based on the overall outcome of a sporting event — including final scores, point differentials, win-loss outcomes, tournament progression, individual or team performance metrics, or season-long statistics — would weigh against determining that the event contracts contradict the public interest,» the CFTC suggested. «The commission preliminarily believes that these categories of sports event contract markets may fulfill price discovery roles and provide valuable insights.»
The agency indicated it might more readily determine something is outside the public interest «where the event contracts lack the potential to inform any economic, commercial, or financial decisions.»
Recently, President Donald Trump expressed support for the direction Selig is pursuing, stating in a social media post that «Other Countries are pursuing this new form of Financial Market, and we want to remain at the forefront.»
While significant rulemakings such as the first tailored regulations for modern prediction markets are the responsibility of the five-member commission, the CFTC is currently functioning with only one member. The White House has left it operating with a single chairman, without further nominations, which contradicts the laws governing the agency that call for three commissioners from the majority party and two from the minority. This is the first instance of the agency being in this situation, and legal experts have suggested that its policy initiatives could face challenges in the future.
The push to restore the commission to full capacity has been a priority for Democratic senators as the U.S. Senate discusses the crypto market structure bill, the Digital Asset Market Clarity Act.
UPDATE (June 10, 2026, 14:35 UTC): Adds details from the CFTC proposal.