CFTC Seeks Comment on Regulatory Framework for Prediction Markets
Commentary by Stephan Ariyan
The CFTC requested comment on how prediction markets should be regulated, including applicable statutory and regulatory requirements, which types of event contracts may be contrary to the public interest, and the potential costs and benefits of future rulemaking.
According to the notice, the CFTC is seeking information to inform potential future agency action in response to a surge in event contract activity. The agency noted that the number of event contracts certified for trading increased from an average of approximately five per year before 2021 to about 1,600 in 2025, alongside a corresponding increase in entities applying to register as designated contract markets ("DCMs") to operate prediction markets.
The CFTC sought public input across several areas:
- Core Principles and Regulations. The CFTC examined how statutory core principles for DCMs, swap execution facilities ("SEFs"), and derivatives clearing organizations ("DCOs") apply to prediction markets. This includes soliciting feedback on issues such as impartial access, dispute resolution, position limits, operational risk, and whether prediction markets should be permitted to offer margin trading to retail customers.
- Public Interest Determinations. The agency requested input on the factors it should consider when determining whether an event contract is "contrary to the public interest" under CEA Section 5c(c)(5)(C) ("Special rule for review and approval of event contracts and swaps contracts"). The CFTC specifically asked how event contracts align with the CEA’s broader goals of price discovery, managing price risk, and hedging.
- Prohibited Activities. The CFTC sought comment on how to interpret statutory categories that may render an event contract "contrary to the public interest," including contracts involving "activity that is unlawful" under state or federal law, terrorism, assassination, war, gaming, or "other similar activity."
- Inside Information and Manipulation. The CFTC examined the role of "asymmetric information" in prediction markets and requested comment on balancing the potential price discovery benefits of informed trading against risks of manipulation, cross-market manipulation, and misuse of nonpublic information, including by government officials.
- Classification and Procedural Aspects. The CFTC requested feedback on how event contracts should be classified (for example, as swaps or futures), whether underlying events qualify as "excluded commodities," and when the Commission should conduct public interest reviews during the contract listing process.
Comments are due 45 days after publication in the Federal Register.
Commentary
The CFTC’s request for comment on prediction markets is best read as an opportunity for market participants: the regulatory perimeter is being redrawn in real time. By openly questioning how existing exchange principles apply to event contracts—and where public‑interest concerns, retail access, and information asymmetries should set hard limits—the Commission is inviting industry input before those boundaries calcify into rules or enforcement positions. Firms operating or transacting in these markets should view this as a narrow window to shape how prediction products are classified, reviewed, and surveilled, particularly as the CFTC weighs heightened scrutiny of contract design, insider risk, and activities that could drift into prohibited territory. In short, those with a stake in prediction markets should consider assessing their current offerings and governance frameworks now, not after the Commission decides where innovation stops and regulation begins.
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