TLDR
- The CFTC released a 267-page proposal to create a framework for what types of event contracts prediction market platforms can legally offer.
- Most sports contracts would be allowed, but micro-bets on single pitches or specific shots may be banned due to manipulation risk.
- Markets tied to war, terrorism, or assassination are likely to be deemed against the public interest.
- The proposal opens a 45-day public comment period and builds on an earlier March 2026 notice of rulemaking.
- The rules mark a major policy shift from the previous administration, which had sought to ban a wide range of political and sports event contracts.
The CFTC released a detailed proposal this week that would set clear rules for what kinds of contracts prediction market platforms like Kalshi and Polymarket can offer to users.
The 267-page document, titled “Prediction Markets; Public Interest Determinations,” was first reported by the Wall Street Journal. It lays out a framework for deciding when an event contract crosses into territory the agency considers against the public interest.
Rather than issuing blanket bans, the CFTC outlines a series of factors the Commission would use to evaluate specific contracts. If a contract fails the public interest test, a registered exchange would not be allowed to list or clear it.
What Would Be Allowed — and What Would Not
Most sports contracts tied to overall game outcomes would pass the test. The CFTC says contracts settling on final scores, tournament results, or season-long stats provide useful price discovery and are hard to manipulate because they depend on the actions of many participants.
However, certain micro-bets are flagged as problematic. The document specifically mentions wagers on the outcome of a single baseball pitch or a specific shot by a specific player. Contracts involving player injuries, officiating decisions, physical altercations, and pre-collegiate sports events are also listed as potentially against the public interest.
Markets tied to war, terrorism, or assassination would likely not be permitted under the new framework.
Political election markets receive a clearer path forward. The CFTC’s analysis finds that elections do not qualify as gaming because voter choices — not skill or random chance — determine outcomes.
Contracts linked to game-show results or outcomes based on random chance would likely be blocked.
A Sharp Shift in Policy Direction
The proposal is a clear break from how the CFTC operated under the previous administration. The agency had previously acted as a legal opponent to prediction market platforms. In 2023, it challenged Kalshi’s election contracts under derivatives law.
That changed when CFTC Chairman Mike Selig took over under the Trump administration. In early 2026, Selig directed staff to pull a 2024 proposed rule that would have effectively banned political and sports event contracts.
The agency followed up with an advance notice of rulemaking in March 2026, asking for public input. The latest proposal builds directly on that process.
Total trading volume across registered contract markets topped $25 billion in April alone, showing how quickly the industry has grown.
The 45-day public comment period is now open. The path forward still faces friction from state gambling regulators and attorneys general, with some observers expecting the question of regulatory jurisdiction to eventually reach the Supreme Court.
