CFTC Begins New Regulatory Push for Prediction Markets

The US Commodity Futures Trading Commission (CFTC) has taken initial steps to create a regulatory framework for prediction markets, launching a rulemaking process while issuing fresh guidance for companies operating these platforms.

CFTC Opens Consultation on Rules for Prediction Markets

The agency announced the move on March 12, opening a public consultation that will help shape how event-based trading contracts are supervised in the future. At the same time, staff at the regulator released an advisory aimed at exchanges that already offer such products, clarifying expectations for compliance and oversight.

Prediction markets allow participants to trade contracts tied to the outcome of real-world events. These instruments typically offer a binary payoff depending on whether a specific occurrence takes place, such as the result of an election or the outcome of a sports match. Market prices are often interpreted as reflecting collective expectations about the likelihood of those events.

CFTC chairman Mike Selig said the latest actions mark the beginning of a broader effort to craft a coherent policy approach while affirming that the derivatives regulator holds primary authority over the sector. According to the agency, the process will begin with an advanced notice of proposed rulemaking that gathers feedback before any formal regulations are drafted.

The consultation invites input on numerous issues, including how exchanges should monitor trading activity, prevent manipulation, and decide which types of event contracts should be allowed. Regulators are also examining whether certain contracts should be banned because they could conflict with the public interest, such as those linked to terrorism, war, or unlawful activity.

CFTC Targets Stronger Oversight as Prediction Markets Surge

The advisory released alongside the consultation is directed at exchanges known as designated contract markets (DCMs). These venues must follow a series of statutory principles designed to maintain fair and orderly trading. Among other things, platforms are expected to list contracts that are not easily manipulated and to maintain surveillance systems capable of detecting suspicious trading behavior.

Special attention is being paid to sports-related event contracts. The agency indicated that exchanges offering such markets should maintain communication with relevant sports authorities when designing contract rules and monitoring potential irregularities.

The regulatory push reflects the rapid growth of prediction markets in recent years. According to the CFTC, the number of event contracts listed annually has expanded dramatically. Between 2006 and 2020, exchanges introduced only a handful of such contracts each year. By 2025, roughly 1,600 had been certified for trading across regulated platforms.

The surge has also triggered a rise in applications from companies seeking permission to operate prediction-market exchanges. Public comments on the proposal will be accepted for 45 days. After reviewing feedback, the CFTC is expected to draft more detailed rules that could eventually establish a permanent regulatory structure for the fast-growing sector.