CFTC Launches Sweeping Review of Prediction Markets

The Commodity Futures Trading Commission (CFTC) on Thursday issued a pair of actions signaling its intent to build a comprehensive regulatory framework for prediction markets, an industry that has exploded in popularity over the past year.

The agency published an Advance Notice of Proposed Rulemaking (ANPRM) seeking public comment on how existing derivatives law should apply to prediction markets, alongside a staff advisory from the Division of Market Oversight offering guidance to exchanges that list event contracts.

The moves come as the CFTC faces a surge of interest from would-be prediction market operators. Applications for designation as a contract market have more than doubled over the past year, largely from entities looking to run prediction markets exclusively, the agency said.

The CFTC’s regulatory push arrives amid a period of unprecedented growth for the sector. Open interest across crypto prediction markets surpassed $1 billion for the first time in February, fueled by Super Bowl-related activity. Spot volume hit a record $1.4 billion on Super Bowl Sunday alone, with Kalshi generating $800 million and Polymarket about $311 million.

Monthly volumes across on-chain prediction markets jumped to more than $27 billion in February from under $100 million in early 2024.

The industry has also attracted heavyweight backing. Intercontinental Exchange, the owner of the New York Stock Exchange, invested $2 billion in Polymarket, while Kalshi raised $300 million, deals that have helped transform prediction markets from a niche crypto experiment into a mainstream trading category.

Fresh Start

The ANPRM effectively opens a new chapter for prediction market regulation. In February 2026, the Commission withdrew a set of proposed rules from 2024 that would have further specified which event contracts are contrary to the public interest, a legal standard that gives the CFTC authority to ban certain types of contracts. The withdrawal cited ongoing state regulatory actions and litigation over the agency’s jurisdiction.

Rather than re-propose those rules, the Commission is now casting a wider net, posing 40 detailed questions to the public on topics ranging from manipulation risks and margin trading to the treatment of blockchain-based prediction markets and the role of inside information.

The staff advisory struck a pro-innovation tone, describing prediction markets as “a proven source of reliable information for news media, sports leagues, financial institutions, and everyday Americans.”

The advisory focused heavily on sports-related event contracts, urging exchanges to engage with professional sports leagues and their integrity units when designing contracts. Staff flagged heightened concerns about manipulation in contracts that settle based on the actions of a single individual, such as a referee or a player, rather than on aggregate outcomes over extended periods of play.

The advisory also reminded exchanges of existing anti-manipulation and insider trading rules, noting that misappropriation of confidential information already constitutes a violation under CFTC regulations.

Key Questions

Among the most consequential issues raised in the ANPRM is whether prediction markets should be allowed to offer margin trading. Currently, event contracts are fully collateralized. The Commission asked for input on how initial margin should be calculated, whether daily variation margin should be required, and what additional disclosures retail customers would need.

The ANPRM also probes the boundaries of the “gaming” category, one of five activities that can trigger a public interest ban on event contracts. The Commission asked whether gaming is synonymous with gambling, whether sports competitions should be treated differently from award shows, and whether the demographics of prediction market participants should factor into its analysis.

On blockchain-based prediction markets, the Commission asked whether existing rules present unique challenges or advantages and which areas would benefit from tailored guidance, a question with direct implications for platforms like Polymarket that operate on decentralized infrastructure.

This article was written with the assistance of AI workflows. All our stories are curated, edited and fact-checked by a human.