The U.S. Commodity Futures Trading Commission has proposed new rules for prediction markets, clarifying that contracts based on sports event outcomes are generally not against the public interest. The proposal distinguishes these from pure gambling and explicitly states election contracts are not considered “gaming,” providing regulatory clarity for platforms like Kalshi and Polymarket.
The U.S. Commodity Futures Trading Commission (CFTC) has proposed new rules for prediction markets. The proposal signals that sports event contracts are generally not contrary to the public interest, even though federal law classifies them as “gaming.”
The draft distinguishes markets based on final scores and win-loss records from games of pure chance. Contracts tied to outcomes that could encourage manipulation, like player injuries, are unlikely to meet the public interest test.
The proposal also clarifies that election contracts are not considered “gaming.” This could further ease regulatory uncertainty for platforms such as Kalshi and Polymarket.
Gary Kalbaugh, a partner at Cahill Gordon & Reindel LLP, said the proposal is principles-based. “‘Gaming’ is defined more broadly than anticipated and sweeps in sports events,” Kalbaugh wrote.
The proposed rules come as prediction markets continue to gain significant momentum. Kalshi and Polymarket have reached multibillion-dollar valuations amid rising interest.
Kalshi recently partnered with Nasdaq to launch markets forecasting private company valuations. Polymarket has partnered with Dow Jones to integrate its data into media brands like The Wall Street Journal.
Melinda Roth, a professor at Georgetown University Law Center, noted the markets are becoming more mainstream. The draft rules are open for public comment for 45 days.
