The U.S. Commodity Futures Trading Commission has released a proposed rulemaking for prediction markets, laying out the first dedicated federal framework for event contracts. Published on June 10, the draft is designed to create a standardized review process for deciding which contracts serve the public interest and which should be barred from trading. For platforms such as Polymarket and Kalshi, the proposal marks a shift toward written rules instead of fragmented case-by-case treatment.
Prediction markets have expanded well beyond crypto-native circles in recent years. Traders now take positions not only on asset prices, but also on elections, economic releases, sports outcomes, and geopolitical developments. CFTC Chair Mike Selig said in a statement that the agency will protect the integrity of regulated markets while not standing in the way of “responsible innovation.” He also described the proposal as a durable and transparent framework that can identify contracts Congress expects regulators to police closely while leaving room for lawful market activity.
Contracts tied to war, crime, and pure gambling face a ban
Under U.S. federal law, contracts involving war, terrorism, assassination, unlawful activity, or pure gambling are considered contrary to the public interest and are prohibited. The draft carries those boundaries forward and states that platforms listing these event contracts fall within the CFTC’s exchange oversight. That places the first layer of responsibility on operators themselves to prevent unlawful listings and to guard against manipulation and abusive conduct.
The proposal now moves into a public comment period before any final rule is adopted. One major feature is a review window of up to 90 days for individual contracts, giving the agency time to determine whether a product meets the public-interest standard. For market operators, that also means a more structured approval environment is taking shape.
A three-step test would determine whether a contract should be blocked
If the CFTC seeks to prohibit a contract, it would apply a three-part test. First, the contract must be based on a real-world event that has occurred or is occurring. Second, it must fall within a sensitive category that could harm the public interest, such as war or assassination. Third, the commission would decide whether the contract in question actually violates the U.S. public interest. The structure shows that the agency is not looking only at broad subject matter, but also at how a contract is defined and settled.
The draft gives an example to make that distinction clearer. A contract based on the volume of crude oil shipped through the Strait of Hormuz during a set period would not automatically be treated as a war-related contract, even if regional military conflict affects the data. The deciding factor is that settlement would rely on commercial shipping figures rather than on the occurrence of war itself.
Sports contracts remain the clearest area of regulatory tolerance
Among the categories discussed in the proposal, sports-related event contracts receive the most explicit room to operate. The CFTC keeps a relatively tolerant stance toward sports markets and notes factors such as final scores, point spreads, win-loss records, advancement, individual or team statistics, and even season-long performance metrics when assessing whether a sports contract conflicts with the public interest.
The agency argues that sports event contracts can contribute to price discovery and can transmit commercially relevant and macroeconomic information to the market. By contrast, a contract that offers no useful reference point for economic, commercial, or financial decision-making would face a much higher chance of being found contrary to the public interest. The draft also says the commission prefers a multi-factor balancing approach, weighing possible harms against benefits such as hedging value, informational utility, and the flexibility to accommodate new contract designs.