WASHINGTON, March 12 - The U.S. Commodity Futures Trading Commission has formally asked for input from the public as it moves toward proposing regulations that would govern events contracts and prediction markets. In a public notice issued Thursday, the agency identified key areas where rules may be necessary, including consumer protections against manipulation, the possibility of trading on margin, and criteria for prohibiting certain contracts on public interest grounds.
The notice singles out wagers tied to terrorism and military action as types of contracts that regulators should consider banning. It also signaled a broader concern for how to police contracts that could be ethically or legally problematic.
While the CFTC has weighed the question of regulating prediction markets for nearly two decades, those platforms have surged in popularity since the 2024 U.S. elections, when real-time probabilities on outcomes were viewed as more accurate than polling in forecasting the victory of Donald Trump. That expansion in use has coincided with disputes over who should oversee these markets.
The agency faces competing claims of jurisdiction from state gaming regulators, which argue that events contracts are essentially a form of traditional gambling and therefore fall under state oversight. At the same time, some Democratic lawmakers and other critics have voiced strong concerns that such markets are particularly susceptible to manipulation.
The public notice acknowledged recent controversies connected to events contracts. The CFTC referenced litigation involving the prediction market Kalshi, which was sued earlier this month after declining to pay out on wagers related to the downfall of former Iranian Supreme Leader Ayatollah Ali Khamenei.
Events contracts are described in the notice as tradable yes-or-no wagers that let users place bets on a wide array of real-world events, including sports, political outcomes and economic indicators. The CFTC's request for comment asks specific questions aimed at clarifying difficult legal and operational issues.
Among the topics the agency asked commenters to address are whether there can be ambiguities in commonly understood meanings of terms such as terrorism and assassination; how to draw lines between cyber terrorism and other forms of cyber attack; whether the phrase all war could be interpreted broadly enough to include all military activity; and how to assess the likelihood that insider information held by federal government employees could affect market outcomes.
Members of the public will have six weeks to file comments for the CFTC to consider as it drafts any formal regulatory proposal. The notice marks a step toward a structured regulatory framework for a fast-growing market with complex legal and ethical questions.