CFTC Moves to Tighten Control Over Prediction Markets

Key Highlights

The Commodity Futures Trading Commission (CFTC) is moving ahead with two measures that could reshape the treatment of prediction markets in the United States.

CFTC Advances Two Prediction Market Rules

The CFTC regulates all prediction market activity on the popular platforms Kalshi and Polymarket. Its authority over event contract trading has been challenged in recent months by several states, including Minnesota and Nevada. Just last week, an appeals court sided with Ohio and Tennessee, agreeing that states should be able to regulate Kalshi sports prediction markets. 

In a move that could strengthen its legal argument for the regulation of event contract “swaps,” the CFTC recently sent two new rule proposals to the White House Office of Management and Budget (OMB) for review. 

One measure would change the definition of a swap so casino-style gambling products are not included. Because it is an interim final rule, it could take effect as soon as it is published in the Federal Register if the CFTC has sufficient legal grounds to make the change immediately.

The second proposal would expand the definition of a swap to cover event contracts traded on prediction market platforms. After the OMB finishes reviewing the proposals, CFTC Chairman Michael Selig would need to vote on whether to release them for public comment.

Together, the proposals are meant to make the CFTC’s role in prediction markets clearer. They would also help explain which event contracts fall under federal swap rules and which gambling-style products do not.

Federal & State Authority Collide

The debate over event contracts has become an increasingly contentious dispute about who has authority to regulate prediction markets. If the contracts are treated as swaps, the CFTC would have a stronger basis to claim exclusive jurisdiction. That approach could limit the role of state gambling regulators, some of which have challenged prediction platforms in court.

The issue is moving through the federal courts. Appeals courts have reached conflicting conclusions about whether event contracts qualify as swaps, creating a split that has drawn the attention of the Supreme Court. The CFTC is trying to address the uncertainty through its rulemaking process rather than waiting for Congress.

State regulators continue to push back. New York sued Polymarket in an effort to block the platform in the state, following earlier action against Kalshi. Minnesota banned prediction markets in May and the CFTC responded immediately with a counter-suit.

Market Integrity & Enforcement Draw Attention

The CFTC is also examining types of prediction contracts and conduct on trading platforms. Former Rep. Adam Kinzinger is under investigation over wagers placed on Kalshi that were tied to his own pardon. Separately, the agency issued an advisory warning about mention markets, which are contracts that settle based on whether a named person says certain words.

“These contract types present a heightened risk of manipulation because their settlement turns on the discrete conduct of a person that may be neither independently generated nor externally verifiable,” the agency wrote in a Sept. 22 release. The warning suggests the commission is looking beyond jurisdiction and toward market integrity.

For now, the rules are not final. Their submission to OMB shows the CFTC is preparing to define clearly which prediction-market products fall under federal commodities law and which do not. The outcome could shape how platforms operate, how states respond, and how courts handle disputes over the boundaries between derivatives trading and gambling.