The US Commodity Futures Trading Commission published its initial proposed rulemaking for prediction markets on Wednesday. The regulatory draft focuses on contract review procedures and establishes a 45-day public comment period.
The proposal targets amendments to CFTC Regulation 40.11 and introduces Appendix F to part 40. Stakeholders may submit feedback once the document appears in the Federal Register. This release covers a narrower scope than the broader regulatory notice announced in March. The framework requires the commission to evaluate whether specific contracts fall under Section 5c(c)(5)(C) of the Commodity Exchange Act.
Agreements involving terrorism, assassination, war, gaming, or unlawful federal and state conduct will be assessed for public interest alignment.
Defining Gaming and Sports Contracts
The 267-page document addresses the gaming sector directly, with the term appearing 222 times. Page 161 introduces a formal definition, describing gaming as rule-governed recreational activity where outcomes depend on participant luck, skill, or athletic ability. The text explicitly separates elections and awards from this category, classifying them as contests. Current listed contracts already demonstrate a shift from earlier regulatory positions. These markets now cover aggregate sports performance metrics, including final scores, point differentials, seasonal statistics, and tournament progression.CFTC chairman Michael Selig stated the proposal provides a transparent method to review congressionally mandated contracts while allowing valid markets to operate. Legal disputes over prediction markets frequently examine whether sports event agreements qualify as gaming under existing CEA language. A gaming classification would prevent those contracts from trading on regulated exchanges.
The current framework represents a departure from the commission’s earlier regulatory stance. A broader notice regarding prediction market oversight was initially announced in March. The new proposal narrows that scope to focus specifically on contract evaluation procedures.