The U.S. Commodity Futures Trading Commission on Wednesday proposed its first regulation of prediction markets, laying out an approach for how it can make widespread assessments of whether contracts violate the federal standard on what is prohibited.
The agency that regulates American derivatives has defended prediction markets such as those run by Kalshi, Polymarket and Crypto.com, and Chairman Mike Selig has made them a top legal and regulatory priority for the CFTC. It has been promising a new, tailored regulatory regime for the industry, and the new proposal addresses some of what may be multiple rules applied by the regulator.
“The CFTC will protect the integrity of our regulated markets without hindering responsible innovation,” Selig said in a statement. “This proposal provides the commission with a durable and transparent framework to identify the contracts that Congress directed us to examine while allowing legitimate markets to move forward.”
Federal law holds that contracts involving war, terrorism, murder, illegal activities, and gambling may be considered outside the public interest and not permitted. In practice and in its recent adoption of data-sharing agreements with professional sports leagues, the CFTC has embraced the vastly growing field of sports betting as an apparent public interest.
The platforms on which event contracts are traded are exchanges regulated by the CFTC, and the agency has said the exchanges are the first line of defense in determining whether contracts are legal and whether markets are not manipulated or abused.
The proposal provides for a 90-day review process on public interest determinations for individual contracts.
President Donald Trump recently expressed support for the path Selig has taken, saying in a social media post that “other countries are pursuing this new form of financial market and we want to stay on top.”
