The Commodity Futures Trading Commission (CFTC) is preparing a new regulatory framework for prediction markets that would establish, for the first time, a formal process for reviewing event-based contracts rather than relying on broad prohibitions. The proposal could significantly alter how platforms including Polymarket and Kalshi operate in the United States.
What the rules would do
The framework would create a structured review process for prediction market contracts, allowing the CFTC to evaluate individual contracts against a public-interest standard rather than imposing blanket restrictions on entire categories. Under the proposed approach, regulators would assess contracts on a case-by-case basis, considering factors including the type of event, the specificity of the market, and the potential for manipulation or insider trading.
Certain contract types would face heightened scrutiny. Sports-related markets involving player injuries, officiating decisions, and highly specific in-game events would be subject to closer review before being approved for trading. Contracts tied to geopolitical events — including wars, terrorism, political violence, and assassinations — would face the strictest examination under the proposed public-interest framework, according to a Wall Street Journal report .
The rules would not amount to an outright ban on any category of prediction market. Instead, they would establish a formal evaluation architecture for the CFTC to use when assessing whether a contract serves the public interest – a framework that prediction market operators have largely lacked to date.
The regulatory moment for prediction markets
The proposal arrives as the sector faces intensifying scrutiny from multiple directions. Congressional panels have opened inquiries into insider trading risks on prediction platforms. Kalshi, the sole CFTC-regulated prediction market operating in the US, this week introduced employer-disclosure requirements for participants on high-risk markets — a direct response to concerns about asymmetric information in political and event-based contracts.
Polymarket occupies a more complex position. The platform operates offshore but accessible to US users, a structure that has drawn questions about the enforceability of CFTC rules against non-domestic operators. Under the proposed framework, contracts offered to US persons on offshore platforms could face scrutiny even if the platform itself is not US-based.
Prediction market volume has grown sharply over the past two years, with platforms attracting increased attention from institutional traders, retail users, and media organizations that reference contract prices as quasi-consensus indicators. The CFTC's move reflects a broader regulatory recognition that the sector has reached a scale that warrants dedicated supervisory attention.
What comes next
The proposal remains in draft form and has not been formally published for public comment. A CFTC spokesperson declined to confirm specifics of the framework. Industry lawyers expect the proposal to be formally released within weeks, followed by a comment period during which prediction market operators, trading firms, and consumer advocacy groups will have the opportunity to submit feedback.
The timeline for final adoption remains unclear. Whether the framework ultimately becomes law in its current form or undergoes significant revision during the comment process will determine whether it functions as a compliance roadmap for US-based platforms or a de facto barrier that pushes volume further offshore.
