The U.S. Commodity Futures Trading Commission on Wednesday proposed its first regulation of prediction markets, offering an approach for how it can conduct widespread assessments to determine whether contracts exceed the federal standard for what is prohibited.
The agency that regulates U.S. derivatives is a defender of prediction markets such as those run by Kalshi, Polymarket and Crypto.com, with Chairman Mike Selig making them a major legal and regulatory priority for the CFTC. He promised a new regulatory regime tailored to the industry, and the new proposal addresses part of what could be multiple rules enforced by the regulator.
“The CFTC will protect the integrity of our regulated markets without hindering responsible innovation,” Selig said in a statement. “This proposal gives the commission a sustainable and transparent framework to identify contracts that Congress has asked us to review while allowing legitimate markets to move forward.”
Federal law states that contracts involving war, terrorism, assassinations, illegal activities and gambling may be considered contrary to the public interest and prohibited. In practice and as part of its recent adoption of data sharing agreements with professional sports leagues, the CFTC has viewed the growing field of sports betting as a clear public interest.
The platforms on which event contracts are traded are exchanges regulated by the CFTC, and the agency has said that exchanges are the first line of defense in determining whether the contracts are legal and whether the markets are not being manipulated or abused.
The proposal envisions a 90-day review process to determine the public benefit of individual contracts.
President Donald Trump recently expressed support for the path Selig is taking, saying in a social media post that “other countries are pursuing this new form of financial market and we want to stay at the top.”
