CFTC Proposal Establishes New Playbook for Prediction Markets

In a major move to clean up and formalize the fast-growing event derivatives industry, the Commodity Futures Trading Commission (CFTC) has issued a new set of proposed rules to decide exactly what can and cannot be traded on prediction markets.

The new framework will continue to allow most sports-related markets to operate freely, but it gives federal regulators the teeth they need to rein in specific sports markets that are especially vulnerable to cheating and manipulation.

This regulatory shift comes as platforms like Kalshi and Polymarket process billions of dollars in volume, transforming from niche internet corners into mainstream financial systems.

However, while the proposal establishes clear boundaries for operators, it stops short of the heavy-handed bans and tighter restrictions that many industry critics and advocacy groups were fiercely demanding.

New Rules for the Field: What Changes in Sports Forecasting

The CFTC’s proposal draws a line across the sports world. Big-picture sports outcomes—like trading positions on who will win the 2026 Men’s World Cup or a professional basketball playoff series—will be completely allowed under the new rules.

Because these major events are broadcast everywhere and watched by millions, the CFTC views them as “highly publicized”, safe and stable markets where people can legally manage risk.

However, the agency is completely banning “micro-forecasts” because they are too easy to rig. This means you will not be allowed to trade positions on highly specific, unpredictable details that a single person could control, such as referee calls, sudden coach firings, or precise player injuries.

By cutting out these hyper-specific outcomes, the watchdog hopes to prevent anyone with inside information from cheating the system.

Defining the Boundaries: “Gaming” vs. “Public Interest”

At the heart of this proposal is an effort to finally define what counts as “gaming” and what is “contrary to the public interest.”

In that sense, under the proposed rules, the CFTC will officially block any contracts tied to severe, harmful activities. This means no trading positions allowed on terrorism, war, assassinations, or any actions that break federal or state laws.

A Middle Ground: Pushing Back Against Stricter Demands

While the new framework imposes clear boundaries, it stops short of the heavy-handed bans that some industry critics and advocacy groups were pushing for.

During the public feedback phase, several consumer protection groups wanted the CFTC to raise the minimum age for trading on prediction markets from 18 to 21. Others lobbied for a complete ban on individual athlete proposition contracts, while some pushed the agency to revert back to Biden-era rules that attempted to outlaw political and election forecasting altogether.

Wednesday’s proposal does not go that far. Instead of caving to demands for blanket bans or tighter age restrictions, the CFTC chose a balanced middle ground.

The regulator is opting heavily on data sharing and market integrity—forcing platforms to work directly with sports league integrity units and use official data to settle contracts rather than shutting down entire categories of trades.

The 90-Day Review Timeline and New Legal Standards

To make sure new contracts are judged fairly, the CFTC is setting up a strict 90-day review timeline. Instead of suddenly shutting down a market without warning, the Commission will take up to three months to look at new contract ideas on a case-by-case basis.

In a press release announcing the new proposal, CFTC Chairman Michael S. Selig made it clear that the agency wants to support new financial technologies while keeping the markets clean. “The CFTC will protect the integrity of our regulated markets without standing in the way of responsible innovation,” Selig stated.

Under this standard, the CFTC cannot just ban a contract because it dislikes it; the agency must actually prove that the market poses a real threat to the public. This 90-day window gives exchanges a fair chance to show how their forecasts help the economy before a neutral federal panel makes a final decision.