The Commodity Futures Trading Commission moved to take a more active role in the prediction-markets sector by issuing its first staff guidance and opening an Advance Notice of Proposed Rulemaking. Together, the two actions begin a formal review of how prediction-market contracts should be supervised and signal that the agency wants clearer control over the market’s next phase of growth.
The package combines immediate expectations for exchanges with a longer public rulemaking process. The CFTC’s goal is to reduce manipulation risk, clarify the scope of federal oversight, and set firmer standards for Designated Contract Markets such as Kalshi, Polymarket, and Coinbase.
The CFTC Is Setting Immediate Expectations While Opening a Broader Review
Although the staff advisory is non-binding, it lays out the conduct the agency now expects from operators. Exchanges were told to consult the CFTC before listing new contracts, maintain systems capable of detecting suspicious trading and insider activity, and avoid products that are readily susceptible to manipulation.
The guidance was especially pointed when it came to sports-related markets. Contracts tied to individual player conduct, injuries, or referee decisions were highlighted as particularly vulnerable because a single person can materially affect the outcome.
CFTC Chairman Mike Selig described the move as an effort to end a long period of regulatory ambiguity. He said the agency had not previously offered clear standards for markets used by millions of Americans and stressed the need to prevent manipulation, insider trading, and other abuses in derivatives trading.
The advisory also pushed operators toward closer coordination with sports institutions. Exchanges building sports-event contracts were encouraged to work with leagues and governing bodies on settlement data and integrity monitoring, reinforcing the idea that market design now has to be paired with external oversight.
The Rulemaking Process Could Reshape Market Design
At the same time, the ANPRM opened a 45-day comment period and invited public feedback on whether the Commodity Exchange Act needs new rules or amendments to address prediction markets more directly. That step moves the issue from guidance into a formal regulatory process that could ultimately reshape how these products are listed, monitored, and traded.
The CFTC also used the notice to restate its view that prediction markets fall under exclusive federal jurisdiction. That position is meant to reduce the legal friction created by state-level gaming disputes, even as the agency asks for public input on several unresolved statutory and market-structure questions.
Among the issues raised were how to interpret statutory limits on contracts tied to gaming, terrorism, assassination, war, or unlawful activity, as well as what surveillance standards, position limits, and protections against abusive trading should apply. The agency also asked whether event contracts should be eligible for margin or leverage and whether responsible-gaming measures such as self-exclusion or advertising limits belong inside the regulatory framework.
The process is likely to be extensive rather than quick. The CFTC said it will use roundtables and advisory committees to gather more input, while legal observers noted that any eventual rule text will need to be drafted carefully enough to withstand court challenges.
Traders, liquidity providers, and institutional desks should expect tighter pre-listing scrutiny, stronger surveillance requirements, and the possibility that future limits on leverage or contract design could raise compliance costs while narrowing product flexibility.
Over time, a clearer federal framework could reduce some of the uncertainty created by overlapping state challenges, but it may also slow innovation. As the rulemaking process unfolds, firms are likely to shift capital and product development toward lower-compliance-risk structures until the CFTC makes its long-term position fully clear.