The U.S. Commodity Futures Trading Commission (CFTC) has advanced a comprehensive rulebook for prediction markets, marking a significant regulatory shift. The proposal, sent to the White House Office of Management and Budget in late May, would explicitly permit event contracts on sporting events under federal oversight while imposing a complete ban on wagers tied to war, terrorism, and assassinations. This move is designed to combat insider trading and manipulation in markets that have grown rapidly in popularity.
Under the proposed framework, sports-related contracts would be allowed provided operators meet transparency, liquidity, and anti-manipulation standards. Market operators must implement surveillance systems and reporting mechanisms to prevent abuse. In contrast, contracts based on political violence, armed conflicts, and targeted killings are categorically prohibited because they are inherently susceptible to non-public information, undermining fair market integrity.
President Donald Trump endorsed the CFTC's exclusive authority over prediction markets in a May 26 Truth Social post, opposing state-level interference and arguing for federal preemption to protect U.S. competitiveness. The proposal also rescinds a 2024 ban on sports-related event contracts, replacing it with regulated permission under commodity law. The CFTC previously issued an Advance Notice of Proposed Rulemaking in March 2026, gathering public comments until April 30. The current draft reflects that feedback and outlines permissible contract categories, operator duties, and enforcement mechanisms against fraud.
For platforms like Kalshi and Polymarket, the new rules provide long-awaited regulatory clarity. Kalshi, a CFTC-registered designated contract market since 2020, would benefit from the removal of state barriers that limited its expansion. Polymarket, which obtained designated contract market status in 2025 after legal scrutiny, operates on blockchain infrastructure and gained prominence during the 2024 election cycle. While Polymarket has not launched a native token, the clear federal framework could shape its compliance and product roadmap. Both platforms would face defined duties, including controls against insider trading and fraud, with CFTC enforcement under existing commodity statutes.
The proposal remains under review at the Office of Management and Budget, and a formal notice of proposed rulemaking is expected later. The final rules may change based on further public and congressional input, but the direction signals a more defined environment for compliant prediction markets.
