Prediction markets face CFTC scrutiny as guidance nears

CFTC guidance on prediction markets: what changes with the ANPRM

according to the Commodity Futures Trading Commission (CFTC), Chairman Michael S. Selig has directed staff to draft guidance and an advanced notice of proposed rulemaking (ANPRM) for event contracts to curb manipulation and insider trading. The initiative aims to set clearer expectations for prediction-market venues and designated contract markets (DCMs).

An ANPRM signals movement from ad hoc statements toward a transparent rulemaking track, preceding any proposed rules. The chairman has framed the effort as enabling lawful innovation while reinforcing statutory boundaries.

Why it matters: insider trading and market manipulation, Commodity Exchange Act (CEA)

Under the Commodity Exchange Act (CEA), event contracts are already covered by the existing enforcement toolkit. According to King & Spalding, those tools reach insider trading, fraud, manipulation, wash trades, and other non-competitive abuses.

An Enforcement Advisory dated February 25, 2026 from the agency’s Division of Enforcement described cases involving misuse of non-public information and non-transparent conduct on prediction markets. The advisory indicates that current authority is being actively applied.

Law-enforcement voices have emphasized that platform labels do not change legal exposure. “Because it’s a prediction market doesn’t insulate you from fraud,” said Jay Clayton, U.S. Attorney for the Southern District of New York (SDNY).

For platforms, the near-term signal is tighter risk controls and engagement with affected stakeholders. According to Akin Gump, the agency is focused on insider trading in prediction markets and has been in contact with markets and sports leagues to help define boundaries.

For traders and insiders, the Enforcement Advisory underscores scrutiny of trading based on non-public information and opaque, non-competitive activity. Expectations may include clearer surveillance and faster escalation to the Commission when red flags surface under existing frameworks.

Stakeholder positions emphasize maintaining limits on certain categories. As outlined in a letter from Senator Martin Heinrich (D-NM), the CEA treats gaming (including sports), war, terrorism, assassination, and similar enumerated activities as contrary to the public interest.

Compliance checklist for prediction market operators and DCMs

Core surveillance and controls to deter insider trading

Operators can align programs with the agency’s focus on misuse of non-public information, manipulation, wash trades, and non-competitive trades. John Auerbach of Nardello & Co. urged stronger internal compliance and controls to minimize reputational risk. Practical emphasis includes robust trade surveillance, documented user-level investigations, and clear restrictions on insider access to non-public information tied to listed events.

Governance, disclosures, and escalation workflows for manipulation risks

Governance should define how manipulation risks are identified, reviewed, and escalated to the Division of Enforcement when warranted. Disclosures can explain surveillance practices, conflicts management, and listing standards that exclude enumerated prohibited events referenced in statute and policy letters. DCMs can formalize escalation paths from first-line monitoring to compliance leadership and, where appropriate, regulatory referral.

FAQ about CFTC guidance on prediction markets

Are insider trading and market manipulation already illegal on prediction markets under the CEA?

Yes. Under the Commodity Exchange Act, existing enforcement tools already address insider trading, fraud, manipulation, wash trades, and non-competitive trades, as recent enforcement advisories and legal analyses explain.

How could the ANPRM affect platforms like Kalshi and other DCMs?

It may clarify permissible event categories, surveillance expectations, and disclosure standards, signaling support for lawful innovation while organizing a formal rulemaking pathway the chairman has directed staff to initiate.