The Commodity Futures Trading Commission unveiled a proposal for prediction markets Wednesday that would crack down on bets related to war, terrorism and assassination.
The CFTC plan also proposed narrowly defining some “gaming” — the category that helped launch the surge of sports-related prediction markets 18 months ago - to be games of “pure luck.” That definition would allow the majority of sports contracts now trading to continue.
The move is the latest by the agency that has argued it has “exclusive jurisdiction” overseeing the surging industry. The contracts are treated as derivatives by the regulator and allow people to place a wager on just about anything, from the FIFA World Cup to the timing of a potential peace deal between the US and Iran.
“The CFTC will protect the integrity of our regulated markets without standing in the way of responsible innovation,” Chairman Michael Selig said in a news release.
The once-niche corner of finance exploded in popularity after a federal court approved Kalshi to trade election-related contracts just before the 2024 elections. The first sports contracts, previously viewed as prohibited by prior administrations, launched soon after. Prediction markets, including those not regulated by the CFTC, are now seeing billions of dollars of notional trading volume each month.
The industry is expected to only grow as more companies submit applications to act as brokers or exchanges for them. But that rapid expansion has left questions unanswered about what constitutes “gaming” and whether it includes activity many states and others view as sports gambling. And while the CFTC’s statute gives the agency discretion to subject certain issues — such as assassination and terrorism — to heightened scrutiny, there have been concerns about a moral gray area for some of the bets.
Since President Donald Trump returned to the White House, the CFTC has embraced prediction markets in sharp contrast to Biden-era regulators who sought to restrict the industry. Views on the platforms haven’t cut cleanly around party lines though.
Numerous Republican state attorneys general and former GOP lawmakers, including Trump’s previous White House chief of staff Mick Mulvaney, are pushing for states to regulate the industry. Democrats including Senator Richard Blumenthal have also raised concerns about prediction markets.
As the battle continues to play out in courts, the agency has backed the exchanges and sued regulators in Illinois, Connecticut and Arizona for trying to force companies to abide by their respective laws.
The agency said at the time that “this unprecedented measure by the CFTC is necessary” to protect its jurisdiction over prediction markets. It later sued New York, Minnesota and Rhode Island as well.
Trump’s family has also entered the prediction market space. His son, Donald Trump Jr., is an adviser to both Kalshi and Polymarket, and Trump Media & Technology Group Corp. has announced its own marketplace.
