The U.S. Commodity Futures Trading Commission (CFTC) has issued a comprehensive advisory and proposed official rules for prediction-market event contracts, establishing a clear regulatory framework for the sector. The agency warned designated contract markets (DCMs) that they must apply full Part 38 oversight under the Commodity Exchange Act (CEA), especially for higher-risk contracts involving sports and other sensitive real-world events.
The advisory, issued in March 2025, explicitly reminds DCMs that event contracts fall under CEA Section 5(d), DCM Core Principle 3, and Appendix C. These regulations serve as the guide for listing and surveillance. The CFTC stresses that DCMs are the frontline regulators of their own markets and must proactively ensure compliance as prediction-market volumes and complexity grow. This includes robust product submission processes, ongoing surveillance, and reassessment of compliance, moving prediction markets out of any perceived regulatory gray area.
The proposed rules outline several critical requirements for market operators, including the implementation of real-time market surveillance systems, clear and objective contract settlement terms, robust know-your-customer (KYC) procedures, public disclosure of market methodologies, and safeguards against manipulation like wash trading and spoofing.
CFTC Chairman Michael Selig clarified that this action begins a formal rulemaking process based on a consistent interpretation of the Commodity Exchange Act, asserting the CFTC's exclusive jurisdiction to prevent overlapping oversight from other agencies. The commission singles out sports-related event contracts as an area requiring particular attention, signaling that venues listing them will face a higher bar to demonstrate they are not de facto gambling products and that they meet CEA and Part 38 standards.
Major platforms like Kalshi (a registered DCM), Polymarket, and Coinbase (through its derivatives exchange) are directly affected. Kalshi welcomed the clarity, while Polymarket anticipates adjustments to meet the new standards. Smaller platforms now face a decision to either pursue DCM registration or restructure their offerings.
The rulemaking process includes a 60- to 90-day public comment period, with industry groups like the Futures Industry Association and academic researchers expected to participate. Final rules are typically enforceable 6-12 months after the comment period closes, followed by an additional compliance period for platforms.
