US Prediction Markets Receive New Regulatory Guidance from CFTC.
The Commodity Futures Trading Commission (CFTC) has unveiled a new strategy to clarify the regulation of prediction markets in the U.S. Michael Selig the chairman emphasized the need for clear rules on event contracts.
Announced on August 20 during the first meeting of the CFTC’s Innovation Advisory Committee, Selig stated that the agency aims to eliminate years of uncertainty for market participants. The proposal aims to clarify regulations, boost consumer protections, and improve market oversight. These is to curb the amid rising legal and political pressures at the state level.
For instance, Kalshi is currently defending the federal classification of its operations in court, highlighting ongoing jurisdiction disputes. The CFTC reaffirms its authority over prediction markets. Asserting that Congress has granted it exclusive oversight of federally regulated designated contract markets (DCMs). Selig pointed out that some states attempt to apply betting laws to contracts for federally supervised events. However legislation clearly assigns derivative oversight to the CFTC, which plans to defend this in court.
Selig also noted that prediction markets are longstanding, with event contracts recognized under federal law for decades. The new roadmap aims to establish clearer operational standards, including updates to CFTC Rule 40.11. The rule currently allows restrictions on certain event contracts related to war, terrorism, assassination, gambling, or illegal activities. However, vague definitions of gambling and public interest have led to arbitrary rejections and uncertainty for operators.
The proposed reforms will define these concepts more clearly and introduce criteria based on public interest. Additionally building on years of debate over political, sporting, and cultural event contracts. Selig criticized previous efforts to ban such contracts without clear definitions.
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Additionally, the CFTC plans to modernize monitoring procedures with a new reporting system. This will help offer better oversight while reducing unnecessary burdens on exchanges. Changes to rules for DCMs offering event contracts will also focus on expanding consumer protections and clarifying market governance, especially as prediction markets attract more individual investors.
Part of a broader innovation strategy, the roadmap also addresses advancements in AI, blockchain, and digital assets. Selig called for a balanced approach that fosters innovation within a clear regulatory framework, warning that uncertainty could drive businesses abroad.
While the roadmap does not propose immediate rule changes, it signals the CFTC’s intent to develop a comprehensive regulatory framework for prediction markets in the future.
