CFTC Issues Guidance and Advanced Notice of Proposed Rulemaking Relating to Prediction Markets

Key Points

• The Commodity Futures Trading Commission (CFTC) recently took two significant steps towards its regulation of prediction markets.
• First, the CFTC’s Division of Market Oversight (DMO) issued a staff advisory (the “Advisory”) highlighting regulatory obligations and compliance expectations applicable to the listing and trading of event contracts.
• Second, the Commission issued an Advanced Notice of Proposed Rulemaking (ANPRM) seeking public comment on whether, and how, the CFTC should update its regulatory framework governing prediction markets. Interested parties have 45 days to submit comments following publication of the ANPRM in the Federal Register.
• These actions signal heightened regulatory attention to prediction markets at a time when these markets are expanding in size, scope and public visibility.

Background

Prediction markets are online platforms where people can trade “event contacts” that settle based on the outcome of future events with a “yes” or “no” answer, including contracts based on economic indicators, financial benchmarks, sports, popular culture and politics. These markets have exploded in popularity in the last year, with total trading exceeding $60 billion in 2025, a 400% increase from 2024. While a small number of prediction markets generated most of this volume, new companies are rapidly entering the market, including traditional sports betting platforms.

Event contracts offered by prediction markets may fall within the definition of a “swap” under the Commodity Exchange Act (CEA), and as a result, prediction markets currently are being regulated by the CFTC. Prediction markets that accept U.S. customers must register with the CFTC as designated contract markets (DCMs), which are subject to a wide range of regulatory requirements.  

The DMO Staff Advisory: Compliance Expectations for Event Contracts

In its Advisory, DMO emphasizes that prediction markets are subject to the CEA’s existing statutory and regulatory framework and that DCMs serve as front‑line regulators responsible for overseeing the markets they operate. While parts of the Advisory focus on sports‑related event contracts, the principles discussed apply broadly to event contracts and to swaps generally, such as interest rate swaps.

The Advisory focuses particularly on Core Principle 3, which requires that DCMs list for trading only derivative contracts that are not readily susceptible to manipulation. According to DMO, contracts that resolve or settle based on the action of a single individual or a small group of individuals, such as officiating actions during a sporting event, may present heightened risk of manipulation.

The Advisory also stresses DCMs’ obligations under Core Principles 4 and 12 to maintain robust market surveillance, compliance and enforcement programs. Prediction markets are expected to engage in real‑time monitoring of trading activity, investigate anomalies and disorderly trading, and take appropriate disciplinary action. The Advisory also confirms that the CFTC’s existing regulations prohibit fraud, manipulation and insider trading in relation to event contracts.

With respect to sports‑related event contracts, the Advisory encourages prediction markets to engage proactively with Commission staff and, where appropriate, with sports leagues and governing bodies. The Advisory suggests that information‑sharing arrangements, reliance on official data sources and consideration of league integrity standards may help prediction markets mitigate risks related to manipulation and insider trading.

The ANPRM: A Potential Roadmap for Future Rulemaking

In parallel with the Advisory, the Commission issued an ANPRM seeking public comment on a broad range of issues related to event contracts. The ANPRM is the first step in developing new rules to address unique characteristics and risks posed by prediction markets. 

Among other topics, the Commission seeks comment on how existing statutory Core Principles should apply to prediction markets, including principles related to manipulation, market surveillance, position limits, financial integrity and operational risk. The ANPRM also asks whether additional guidance or rule amendments may be warranted for blockchain‑based prediction markets.

A central focus of the ANPRM is the Commission’s authority under CEA section 5c(c)(5)(C) to prohibit event contracts that are deemed contrary to the public interest. That provision identifies certain categories of activity—including gaming, war, terrorism and unlawful conduct—that may form the basis for such a determination. The Commission is soliciting comment on how these categories should be interpreted, whether additional categories should be considered and what factors should inform a public‑interest analysis.

What This Means for Market Participants

The Advisory and ANPRM together signal that the CFTC is sharpening its focus on prediction markets and event contracts. Although the Advisory does not impose new legal obligations, it underscores the Commission’s expectation that prediction markets and market participants adhere to existing requirements under the CEA. The ANPRM likewise does not propose new rules, but it signals that new rules addressing prediction markets are forthcoming. The rulemaking process is typically lengthy, however, and may take a year or longer.

Market operators and other participants active in prediction markets should expect increased regulatory scrutiny over prediction markets, particularly in relation to fraud, insider trading and manipulation. Event contracts that turn on discrete actions by a single individual or small group may attract closer attention from regulators. Indeed, on February 25, 2026, the CFTC’s Division of Enforcement issued an advisory relating to two enforcement cases brought by a U.S. prediction market—both of which involved insider trading in event contracts that could be influenced by a single individual.