FORT LAUDERDALE, Florida - The Trump Administration shared its long-awaited rules for prediction markets Wednesday: the Commodity Futures Trading Commission's proposed framework that would prohibit contracts tied to terrorism, assassinations, war and certain high-risk sports-related events.
The proposal marks the first comprehensive rulemaking effort by the CFTC since prediction markets exploded into the mainstream and became the focus of legal battles between federal regulators, states, tribes and gaming interests.
The proposed rule does not ban sports event contracts outright, a significant development for operators such as Kalshi and other federally regulated prediction markets currently offering sports-related products. Instead, the CFTC outlined a framework it would use to determine whether contracts violate provisions of the Commodity Exchange Act that prohibit certain event contracts deemed contrary to the public interest.
"The CFTC will protect the integrity of our regulated markets without standing in the way of responsible innovation," CFTC Chairman Michael S. Selig said in a statement. "This proposal gives the Commission a durable, transparent framework to identify the contracts Congress directed us to scrutinize while letting legitimate markets move forward."
The proposal now enters a 45-day public comment period.
"The best thing the prediction market industry can do is to make examples now of bad actors," including those who engage in manipulation and insider trading, said attorney Ian McGinley at the SBC Summit Americas. His firm Sidley deals with securities enforcement and regulation.
Sports Contracts Survive — With Limits
While sports event contracts remain the most controversial prediction market product, the commission stopped short of declaring them illegal.
Legacy gaming interests slammed the decision.
"This is a remarkable attempt to redefine what constitutes sports betting. It makes a mockery of congressional intent while going against a bipartisan coalition of 41 Attorneys General, countless legislators across the country, and the 81% of voters who recognize that the so-called 'prediction markets' are backdoor sportsbooks evading state and tribal law," American Gaming Association President Bill Miller said in a statement shared with RotoWire.
"The consequences are real. 'Prediction markets' evasion of state and tribal laws is estimated to have already cost communities across the country more than $1 billion in sports betting tax revenue, hurting critical local projects. This siphoning will intensify as 'prediction markets' continue refusing to comply with state and tribal law," Miller added.
Instead, regulators proposed allowing contracts based on aggregate sports outcomes supported by objective data and established integrity safeguards while prohibiting what they described as "high-risk sports-adjacent" markets.
According to the proposal, prohibited sports contracts would include those based on player injuries, officiating decisions, isolated in-game actions, on-field altercations and pre-collegiate sporting events.
That distinction could provide the clearest indication yet of how the agency intends to regulate sports contracts moving forward.
The proposal is particularly noteworthy because sports event contracts have become the centerpiece of an escalating jurisdictional fight between the CFTC and state gaming regulators. More than a dozen states have challenged sports contracts offered by federally regulated exchanges, arguing they constitute sports betting and therefore fall under state authority.
The CFTC has repeatedly maintained that event contracts traded on designated contract markets are federally regulated derivatives products, not state-regulated gambling.
Mike Mulvaney, Executive Director of Gambling is Not Investing, represents a coalition of parents and consumer advocates focused on stopping sports event contracts. He said the issue of sports betting is already "settled law."
"Now the CFTC wants to supplant state and tribal law and anoint itself a national gaming regulator, allowing companies to simply route sports betting through federal commodities law and avoid the rules," Mulvaney said in a statement.
"If Wall Street can turn the Super Bowl, NBA Finals, and the World Cup into federally approved 'event contracts,' then every limit that lawmakers and regulators have placed on sports gambling becomes optional. The result will be more gambling, less accountability, and a direct challenge to state and tribal authority."
Defining "Gaming"
One of the most closely watched aspects of the proposal involves the agency's treatment of "gaming," a category specifically referenced in the Commodity Exchange Act.
The commission acknowledged the term has long lacked a clear regulatory definition and proposed a framework describing gaming as activities conducted for recreation or entertainment, governed by rules and producing measurable outcomes through skilled participation.
Even with that definition, the proposal leaves substantial room for interpretation, ensuring debate over sports contracts is unlikely to disappear.
Notably, the commission concluded that election contracts would not qualify as gaming because elections are neither recreational nor entertainment activities.
Formalizing Existing Market Restrictions
The proposal also codifies restrictions that have largely existed in practice across federally regulated exchanges.
Contracts tied to terrorism, assassinations and certain war-related outcomes would face heightened scrutiny and likely prohibition under the public-interest framework outlined by regulators.
The agency proposes a multi-step review process that would first determine whether a contract is event-based, then assess whether it falls within categories identified by Congress, before conducting a public-interest analysis.
The commission acknowledged the proposal is only an initial step and indicated additional rulemaking may follow.
A Defining Moment For Prediction Markets
The proposal arrives amid growing political and legal pressure surrounding prediction market apps.
States including Minnesota, Wisconsin, Ohio, Illinois and New York have recently taken action against sports event contracts, while tribal gaming operators have launched their own legal challenges. Earlier this year, Minnesota became the first state to ban prediction market platforms through legislation rather than litigation.
Meanwhile, bipartisan members of Congress have raised concerns about market integrity and insider trading risks, even as the CFTC has expanded oversight efforts and entered integrity-sharing agreements with professional sports leagues, including Major League Baseball and the NHL.
By releasing formal proposed rules, the CFTC is signaling that prediction markets are becoming a permanent part of the regulated financial landscape rather than a temporary regulatory experiment.
The biggest unanswered question remains the same: whether states, tribes and courts will ultimately accept the commission's position that sports event contracts fall exclusively under federal authority.
