U.S. CFTC Issues Guidance, Advance Notice of Proposed Rulemaking Regarding Prediction Markets

The U.S. Commodity Futures Trading Commission (CFTC or the Commission), under Chairman Michael Selig’s leadership, has taken an expansive view of its authority over prediction markets, arguing that the agency has exclusive jurisdiction over event contracts traded on designated contract markets (DCMs) and that such authority preempts state regulation.¹

Recent actions underscore the CFTC’s intent to play an active role in this space. The CFTC Division of Market Oversight (DMO) issued a staff advisory (the Advisory) outlining regulatory considerations for DCMs that list event contracts.² In parallel, the CFTC published an Advance Notice of Proposed Rulemaking (ANPRM) seeking comment on whether to amend or adopt new regulations concerning event contracts traded on prediction markets.³

Key Takeaways

• The Advisory is the clearest signal to date that the CFTC views sports event contracts as permissible for trading on federally regulated exchanges, provided they are designed to comply with the DCM Core Principles and CFTC regulations. At the same time, the Advisory suggests that certain types of sports event contracts, such as contracts on individual player performance, may be viewed more skeptically.
• Market participants should carefully assess risks unique to event contracts, including susceptibility to manipulation or price distortion.
• For sports-related event contracts, proactive engagement with DMO, sports leagues, and integrity-monitoring bodies will be critical.
• Through the ANPRM, the CFTC is seeking comment on the application of DCO Core Principles and existing CFTC regulations to prediction markets as it considers future rulemaking. The ANPRM marks the initial step in the CFTC’s process of developing a tailored regulatory framework to address the unique characteristics and risks of prediction markets.
• Comments on the ANPRM are due April 30, 2026, providing an immediate opportunity for market participants to shape the new regulatory framework.

Prediction Markets Advisory

The Advisory highlights the rapid growth of event contracts as both a financial asset class and a source of information for news media, sports leagues, financial institutions, and everyday Americans. It emphasizes the CFTC’s view that “it is important to encourage innovation and growth” in prediction markets.⁴

The Advisory reminds DCMs that they must comply with the 23 statutory Core Principles set forth in the Commodity Exchange Act (CEA) and all applicable CFTC regulations. It also notes the CFTC’s authority to (1) prohibit the listing or trading of contracts that the CFTC determines are “contrary to the public interest”⁵ and (2) investigate and bring enforcement actions related to insider trading.

Contracts Not Readily Susceptible to Manipulation

The Advisory emphasizes that DCM Core Principle 3 requires DCMs to list for trading only contracts that are not readily susceptible to manipulation. DCMs are encouraged to recognize and account for the possibility that cash-settled contracts, including event contracts, may create an incentive to manipulate the data from which the cash-settled contract is derived. The Advisory cites as examples sports-related contracts that settle based on injuries to individual participants, unsportsmanlike conduct, or the actions of a single or a small group of individuals. These concerns align with recent high-profile incidents involving players taking themselves out of games early, hiding or exaggerating injuries, or manipulating in-game outcomes for the benefit of bettors.

Due to these risks, the Advisory recommends that DCMs consider whether certain categories of event contracts create a heightened potential for manipulation or price distortion. DCMs are encouraged to consult with DMO staff in the early stages of designing such contracts to identify and mitigate those risks. For non-price-based contracts, the Advisory recommends that DCMs consider the nature and sources of the data for settlement calculation, the computational procedures, and the mechanisms in place to ensure the accuracy and reliability of the index value.

Contracts With Multiple Permutations

The Advisory cautions that overly broad contract specifications may impede the Commission’s ability to analyze a contract’s compliance with the CEA. It therefore provides that product submissions should include a description of settlement methodology and account for the various permutations of a contract. The Advisory also recommends proactive engagement with DMO during the design of such contracts.

Sports-Related Event Contracts

DMO staff recommends that DCMs consider the following with respect to sports-related event contracts:

• engaging in pre-self-certification communications with relevant sports governing bodies or authorities when developing contract terms and conditions and related compliance and market oversight programs for sports-related event contracts
• including, as part of the self-certified product submission, an explanation of whether the contract is consistent with the relevant league’s or governing body’s integrity standards, as applicable
• establishing information-sharing and data arrangements with the relevant sports integrity monitoring organization
• relying on official data from the relevant league or governing body as the settlement source
• referring to league integrity standards or guidance to protect against manipulation or insider trading and protect the integrity of the relevant sporting event and league
• cooperating with any league-run investigations into manipulation or insider trading

The Advisory notes that proactive engagement with DMO staff and any relevant sports league or governing body may reduce the likelihood of Commission action, including proceedings for false certification.⁶ The Advisory also notes that the CFTC is discussing settlement integrity issues with relevant sports leagues and that information-sharing arrangements with them may enhance CFTC oversight capabilities.⁷

ANPRM

On March 12, the CFTC issued an ANPRM soliciting public comment on the regulatory framework applicable to prediction markets. The Commission seeks input on how existing statutory Core Principles and CFTC regulations apply to event contracts as well as whether additional guidance or rulemaking may be warranted. Comments are due by April 30, 2026.

The ANPRM is structured as a series of questions to market participants and other stakeholders regarding whether and how the Commission should regulate various aspects of the event contracts market. While it does not propose new rules, the ANPRM represents the first step in a broader effort to evaluate and potentially develop a tailored regulatory framework for prediction markets.

The ANPRM underscores the CFTC’s intention to actively address the novel issues raised by prediction markets. Although the contours of any future rulemaking remain uncertain, the questions posed provide meaningful insight into the Commission’s current areas of focus.

Amendments to Core Principles and CFTC Regulations

The ANPRM solicits comment on whether and how the CFTC should amend its regulations or provide further guidance regarding the application of the DCM Core Principles to prediction markets. The Commission seeks input on a wide range of issues, including (1) resolution criteria for event contracts; (2) how to assess whether an event contract is “readily susceptible to manipulation”; (3) market surveillance, compliance, and enforcement practices; (4) sources of operational risk; and (5) considerations specific to blockchain-based prediction markets.

More broadly, the ANPRM reflects the Commission’s effort to evaluate whether existing regulatory requirements are sufficient to address the distinctive features of prediction markets or whether tailored standards are needed.

Margined Retail Trading

Notably, the ANPRM addresses the potential availability of margined trading for event contracts. The Commission seeks comment on the factors it should consider in determining whether prediction markets should be permitted to offer trading on margin to either retail or institutional customers as well as the implications for DCOs if margined event contracts are permitted.

Public Interest Determinations

The CFTC may prohibit the listing or trading of event contracts it determines are “contrary to the public interest” if the event contracts involve (1) activity that is unlawful under any federal or state law, (2) terrorism, (3) assassination, (4) war, (5) gaming, or (6) “other similar activity determined by the Commission, by rule or regulation, to be contrary to the public interest.”⁸

The ANPRM solicits comment regarding whether the CFTC should apply a previously used “economic purpose” test to determine whether a contract is contrary to the public interest and how the CFTC should consider hedging and price discovery in its public interest determinations. The ANPRM also solicits comments regarding how the CFTC should determine the scope of the five enumerated activities, including “gaming.”

Inside Information

The ANPRM further requests comment on market manipulation and insider trading risks, particularly in markets characterized by information asymmetries or where outcomes may be influenced by a single individual or small group.

¹ See Press Release, CFTC Reaffirms Exclusive Jurisdiction over Prediction Markets in U.S. Circuit Court Filing (Feb. 17, 2026), https://www.cftc.gov/PressRoom/PressReleases/9183-26.

² Prediction Markets Advisory, CFTC Letter No. 26-08 (Mar. 12, 2026), https://www.cftc.gov/csl/26-08/download [hereinafter, Prediction Markets Advisory]; see also Press Release, CFTC Staff Issues Prediction Markets Advisory (Mar. 12, 2026), https://www.cftc.gov/PressRoom/PressReleases/9193-26.

³ Prediction Markets, CFTC, Advance Notice of Proposed Requirement; Request for Comment, 91 Fed. Reg. 12,516 (Mar. 16, 2026), https://www.cftc.gov/sites/default/files/2026/03/2026-05105a.pdf; see also Press Release, CFTC Seeks Public Comment on Advanced (sic) Notice of Proposed Rulemaking Relating to Prediction Markets (Mar. 12, 2026), https://www.cftc.gov/PressRoom/PressReleases/9194-26.

⁴ Prediction Markets Advisory at 1.

⁵ Section 5c(c)(5)(C) of the CEA includes “gaming” among the enumerated categories of activity that may be deemed contrary to the public interest. The Advisory references certain categories (e.g., terrorism, assassination, and war) but does not specifically mention “gaming.”

⁶ Id. at 6.

⁷ On March 19, 2026, the CFTC announced a memorandum of understanding (MOU) with Major League Baseball to facilitate cooperation and information sharing in furtherance of the integrity of professional baseball and related event contract markets. See CFTC and MLB Sign Groundbreaking MOU (Mar. 19, 2026), https://www.cftc.gov/PressRoom/PressReleases/9199-26.

⁸ 7 U.S.C. 7a-2(c)(5)(C).