CFTC unveils prediction market proposal allowing most sports contracts

The U.S. Commodity Futures Trading Commission (CFTC) has unveiled a proposed regulatory framework for prediction markets that would preserve most sports-related event contracts while imposing restrictions on markets deemed vulnerable to manipulation or contrary to the public interest.

Released Wednesday under Chairman Michael Selig, the 267-page proposal represents the clearest effort yet by federal regulators to define the boundaries of the rapidly expanding prediction market industry. Rather than banning specific categories outright, the framework would evaluate event contracts on a case-by-case basis.

Most sports contracts would remain allowed

Under the proposal, contracts linked to game outcomes, point spreads, tournament advancement and overall team performance would generally continue to be permitted.

The CFTC argued that many sports-related event contracts can provide legitimate informational value, describing sports teams as “economic enterprises” and stadiums as “regional economic anchors.”

“Anyone interested in that team as an economic enterprise can use information derived from those event contracts as one factor in economic decision-making,” the proposal states.

The approach signals that the agency intends to maintain its increasingly permissive stance toward prediction markets, even as legal challenges continue across multiple states.

Injury markets and player props face scrutiny

While broad sports contracts would likely survive, the proposal identifies several types of event contracts that could be considered contrary to the public interest.

These include markets involving player injuries, officiating decisions, physical altercations during games and youth sporting events. The framework also casts doubt on the future of many player proposition markets, referring to them as “discrete-action contracts involving specific participants.”

“The Commission believes that event contracts are more likely to be contrary to the public interest when any meaningful information about whether the underlying event will occur is unavailable to the broader market,” the proposal states.

The regulator added that concerns increase when information about an outcome is concentrated among a small number of individuals who could influence the result.

The proposed restrictions mirror concerns raised by professional sports leagues. Both the NBA and NFL have urged regulators to prohibit contracts involving injuries, officiating and other events they believe are susceptible to manipulation.

War and assassination contracts also targeted

Beyond sports, the CFTC indicated that event contracts involving war, terrorism and assassinations would likely fail the public interest test.

The issue has drawn heightened attention following recent insider trading allegations linked to geopolitical prediction markets. Earlier this year, federal authorities charged a U.S. Special Forces soldier accused of profiting from trades related to the capture of Venezuelan President Nicolás Maduro using classified information.

The proposal seeks to address concerns that certain prediction markets could create incentives for harmful behavior or rely on privileged information unavailable to the general public.

Election markets gain greater clarity

The proposal also offers potential reassurance to operators active in political forecasting markets.

According to the CFTC, election contracts fall outside the specific categories subject to the public interest review process, suggesting that election-based markets may face fewer regulatory obstacles ahead of the U.S. midterm elections.

The distinction could prove significant for operators such as Kalshi and Polymarket, which have a range of offerings beyond sports.

CFTC Chairman Michael Selig said the proposed framework aims to balance innovation with regulatory oversight.

“The proposed regulations provide a durable, transparent framework to identify the contracts Congress directed us to scrutinize while letting legitimate markets move forward,” Selig said in a statement.

Industry growth fuels regulatory pressure

The proposal arrives as prediction markets experience rapid expansion.

According to data from the Pew Research Center cited by ESPN, combined monthly trading volume on Kalshi and Polymarket increased from less than $5 billion in September 2025 to $24 billion in April 2026. Sports-related contracts have become a major growth driver, accounting for approximately 80% of Kalshi’s trading volume since mid-2024.

That growth has intensified opposition from commercial gaming operators, tribal gaming groups and state regulators, many of whom argue that prediction markets are functioning as sportsbooks without complying with state gambling regulations.

Several states, including Arizona, Minnesota and New York, are engaged in legal disputes involving prediction market operators and the CFTC.

In March, Senators John Curtis and Adam Schiff introduced bipartisan legislation that would prohibit federally regulated prediction markets from offering contracts resembling sports betting products or casino games.

The American Gaming Association also criticized the latest proposal.

“This is a remarkable attempt to redefine what constitutes sports betting,” AGA President Bill Miller said, arguing that prediction markets are diverting tax revenue away from states and tribal governments.

Public comment period begins

The proposed rules will undergo a 45-day public comment period before any final regulations are adopted.

Prediction market operators are expected to participate actively in the process. Polymarket has already welcomed the agency’s efforts to provide greater clarity, while Kalshi has reportedly begun implementing additional compliance measures, including expanded user disclosure requirements.

The latest proposal is unlikely to be the CFTC’s final move on prediction markets. Reports indicate that regulators are also considering additional safeguards aimed at protecting retail traders as the sector continues its rapid growth.