CFTC issues new guidance for prediction markets

America’s two principal financial market regulators appear to be moving in concert in terms of providing clarity for some of the fastest-growing corners of the markets, which are prediction markets and tokenized equities. 

The Commodity Futures Trading Commission (CFTC), Division of Market Oversight, issued a prediction markets advisory regarding the listing of trading event contracts on Thursday, March 12, 2026.

In a separate event that occurred the same day, the Securities and Exchange Commission (SEC) Chairman, Paul Atkins, used his opening remarks at the agency’s Investor Advisory Committee (IAC) to reaffirm that a long-awaited innovation exemption for tokenized equity securities is imminent. 

Atkins stated, “I expect the Commission to soon consider an innovation exemption to facilitate limited trading of certain tokenized securities with an eye toward developing a long-term regulatory framework.” 

He said this after he stated that the committee will be voting on recommendations regarding the tokenization of equity securities.

What is the CFTC telling prediction market platforms to do?

In its release, the CFTC wrote, “In light of the rapid rise in popularity of prediction markets, the division seeks to encourage growth and innovation in these markets while reminding designated contract markets of their regulatory obligations pursuant to the Commodity Exchange Act and Commission regulations.”

The CFTC division acknowledged that the popularity of prediction markets has been on a rapid rise, and it is seeking to encourage growth and innovation in these markets.

The advisory, directed at registered exchanges including Kalshi, Coinbase Derivatives, and Polymarket, also aims to remind the “designated contract markets of their regulatory obligations pursuant to the Commodity Exchange Act and Commission regulations.”

Under DCM Core Principle 3, exchanges are required to list only contracts that are not readily susceptible to manipulation, and the CFTC’s guidance warns that overly broad or general contract specifications may undermine a platform’s ability to certify compliance with that standard.

The document touched on certain nuances that may have particular applicability to sports-related event contracts. 

The CFTC, under its current chair, regards prediction markets as a legitimate financial product class deserving of proactive regulatory support. 

The agency has indicated it may even go to court to defend the federal government’s jurisdictional authority over prediction markets, amid a parallel battle in which several US states have issued cease-and-desist orders against platforms, including Robinhood’s derivatives arm.

The industry the CFTC is seeking to regulate has also seen astronomical growth. Kalshi and Polymarket, two of the leading prediction market platforms, are currently valued at $11 billion and $9 billion, respectively. 

Both companies are reportedly in early-stage discussions with investors about funding rounds that would value each at approximately $20 billion, double their late-2025 valuations. Kalshi also recently crossed an annualized revenue run rate of $1 billion.

Short-duration contracts are emerging as a new frontier, with Polymarket’s five-minute crypto up/down market reported to have attracted more than $60 million in daily volume since its launch less than a month ago, accounting for 67% of all crypto up/down volume on the platform.

Why is the SEC moving on equity tokenization?

At the IAC meeting in Washington, Atkins invoked what he called “the minimum effective dose of regulation.” He said that disclosure requirements must be rooted in materiality, scale with a company’s size, and avoid what he termed “regulation by shaming.”

On tokenization specifically, Atkins told the committee that the technology “can enhance settlement efficiency, reduce settlement risk, and eliminate unnecessary intermediaries.” 

The commission’s proposed innovation exemption would facilitate limited trading of certain tokenized securities on new platforms while a longer-term regulatory framework is developed, with the Crypto Task Force having consulted hundreds of market participants and received scores of written submissions over the past thirteen months.

Early this year, the New York Stock Exchange announced that it had developed a platform for on-chain settlement of tokenized securities, enabling around-the-clock trading.

However, not every stakeholder seems to share Atkins’s position. Late last year, major stock exchanges, led by the World Federation of Exchanges, whose members include Nasdaq and CME Group, warned the SEC that broad exemptions could dilute investor protections and create competitive imbalances by granting crypto platforms regulatory advantages unavailable to traditional markets.

While the SEC hasn’t shared a publication date for the framework, Atkins’s recent remarks make it seem imminent.

What does this mean for the regulatory landscape?

Thursday’s actions are the latest manifestation of a broader shift in tone from both agencies since Trump’s appointees took over. 

Where the previous administration relied heavily on enforcement actions to define the perimeter of permissible activity, the current commissions have moved toward written guidance, exemptions, and rulemaking as tools of market development.

The CFTC and SEC have also formalized their cooperation, with the two agencies announcing a memorandum of understanding (MoU) establishing a joint working arrangement between them, and Atkins has described plans for harmonized rulemaking—what he has called “a common, coordinated approach unlike anything seen before at these two, often-sparring agencies.”

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