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The Commodity Futures Trading Commission (CFTC) continues to seek public comment on the regulations governing prediction markets.
On Wednesday, the federal agency announced the publication of a Notice of Proposed Rulemaking (NPRM), which will allow stakeholders to provide feedback on how the commission evaluates certain event contracts.
Defining ‘gaming’ could have major industry implications
The proposal would amend CFTC Regulation 40.11 and add Appendix F to Part 40, establishing a framework for determining whether event contracts violate Section 5c(c)(5)(C) of the Commodity Exchange Act.
That provision prohibits derivatives contracts involving terrorism, assassination, war, gaming, or conduct that is illegal under federal or state law.
While the proposal covers all event contracts that could fall under those categories, the “gaming” provision is expected to draw the most attention from the prediction-market industry.
The debate comes as prediction-market operators continue to face scrutiny over sports-related contracts. Over the past year, several states have challenged sports-event markets offered by prediction platforms, arguing the products resemble sports betting and should be regulated under state gaming laws.
The issue has become increasingly significant for companies such as Kalshi and Polymarket. Both operators have faced heightened scrutiny over certain contracts, while sports-event markets have emerged as a focal point in the broader debate over the scope of federal commodities regulation and state gaming oversight.
According to the CFTC’s NPRM, the commission is seeking greater clarity around the statutory terms “involve” and “gaming” as part of its proposed review framework. How those terms are ultimately defined could have significant implications for future event contracts, particularly those tied to sporting events.
Despite growing opposition from some state regulators, CFTC Chairman Michael S. Selig has continued to emphasize the commission’s authority over federally regulated prediction markets.
In a statement accompanying the proposal, Selig said:
“The CFTC will protect the integrity of our regulated markets without standing in the way of responsible innovation. This proposal gives the Commission a durable, transparent framework to identify the contracts Congress directed us to scrutinize while letting legitimate markets move forward.”
Proposal builds on broader prediction-market review
The NPRM follows the Advanced Notice of Proposed Rulemaking issued in March, which sought public input on a broader range of prediction-market issues. The commission described the latest proposal as a more targeted effort focused on event contracts involving activities specifically enumerated in the Commodity Exchange Act.
Public comments on the proposal will be accepted for 90 days.
