CFTC Seeks Public Comment on Prediction Market Regulations

Amid growing concerns over murky legal parameters and the ethics of trades on prediction markets, the Commodity Futures Trading Commission (CFTC) is soliciting public comment on the industry’s regulation.

In a CFTC press release on Thursday, Chair Michael S. Selig signaled that new rules are on the horizon for the burgeoning sector.

“Today’s action is an important step in the commission’s continued effort to promote responsible innovation in our derivatives markets, Selig said.

“This 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.”

Polymarket and Kalshi under scrutiny

The CFTC published an Advanced Notice of Proposed Rulemaking (ANPR) to gather public input on the current prediction landscape, the application of statutory core principles, and the types of event contracts that should be prohibited.

The move is the first clear signal that the commission is responding to backlash over contracts traded on Polymarket and Kalshi regarding the ouster of Iranian Supreme Leader Ali Khamenei and the U.S. mission to remove Venezuelan President Nicolas Maduro.

The “insider information” problem

In those instances, a handful of bettors appeared to have insider information ahead of military operations, placing well-timed wagers that netted nearly $2 million. To date, the traders have not been identified.

Selig has maintained a combative posture regarding prediction markets, rejecting any notion that they should be regulated by state gaming boards like sports betting platforms. Because of the unique nature of prediction markets, trade payouts are treated as derivatives rather than gambling winnings, placing them under the CFTC’s regulatory purview.

The 45-day countdown for public input

There is no formal timetable for any resulting changes, but public comments can be submitted through the CFTC’s Public Comments Portal within 45 days of the ANPR’s publication.