The CFTC proposed its first prediction market framework, supporting sports-based contracts while introducing new standards for regulating event markets.
Crypto News
The Commodity Futures Trading Commission (CFTC) proposed its first regulation for prediction markets on June 10. The framework would decide which event contracts break the federal public interest standard. Sports-based contracts received broad support under the plan.
"The CFTC will protect the integrity of our regulated markets without standing in the way of responsible innovation," Chair Michael Selig said in a statement. He said the proposal gives the agency a durable and transparent framework while allowing legitimate markets to move forward.
Federal law lets the agency block certain contracts. Restricted categories include war, terrorism, assassination, illegal activity, and gaming. The 267-page proposal sets a three-part test before any ban. A contract must settle on something occurring; it must involve a restricted category; and the commission must then formally find it contrary to the public interest.
Multi-Factor Test Replaces Earlier Approach
The CFTC would weigh several factors instead of using one simple test. Those factors include a contract's hedging value and its potential to encourage illicit behavior. The proposal also includes a 90-day review process for individual contracts.
Sports contracts fared well in the proposal. Contracts on final scores, point differentials, tournament advancement, and player statistics would weigh against a ban. The agency said such markets may serve price discovery functions.
The proposal drew careful lines within sensitive categories. A contract on crude oil moving through a key shipping strait would not count as war-related, as its settlement measures commercial shipping, not conflict. A contract on an armed attack causing civilian deaths would count as terrorism-related.
The approach reverses the agency's earlier direction. A previous rulemaking sought to restrict contracts tied to gaming, war, terrorism, and assassination. That effort was scrapped earlier in 2026.
Insider Trading Concerns Shape the Debate
Insider trading remains a major concern for the sector. In April, prosecutors indicted an active-duty US Army soldier. He allegedly used non-public information to place about $33,000 in Polymarket bets before a government operation. The trades netted more than $400,000. Kalshi rolled out mandatory employment verification for sensitive markets this week, while Polymarket has added its own integrity safeguards.
The rule is now open to public comment before any final version. It would take effect within 60 days of completion. Selig signaled more action ahead, writing on X that "this will not be the last prediction market rulemaking" as the agency balances integrity with innovation in crypto markets.
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