The U.S. Commodity Futures Trading Commission has proposed new rules for prediction markets, distinguishing sports event contracts from games of chance and clarifying that election contracts are not considered "gaming."
The proposed rules could significantly shape the future regulatory landscape for prediction markets in the U.S., potentially increasing their legitimacy and adoption by both retail and institutional investors.
The U.S. Commodity Futures Trading Commission (CFTC) has proposed new rules for prediction markets, aiming to establish a formal regulatory framework and clarify which event contracts are permissible. The draft regulations, open for public comment for 45 days, distinguish sports event contracts from games of pure chance, suggesting that markets based on final scores and win-loss records can aid price discovery.
However, contracts tied to outcomes that could encourage manipulation, such as player injuries or officiating decisions, are unlikely to meet the public interest test. The proposal also clarifies that election contracts are not considered "gaming" under federal law, potentially easing regulatory uncertainty for platforms like Kalshi and Polymarket. Gary Kalbaugh, a partner at Cahill Gordon & Reindel LLP, noted that the proposal is principles-based, requiring a case-by-case public interest analysis for each contract, with aggregate outcome contracts presumptively permissible.
These proposed rules emerge as prediction markets, described as an "asset class" in the draft, gain momentum and institutional interest. Kalshi has partnered with Nasdaq to launch new prediction markets, while Polymarket is integrating its data with Dow Jones media brands. Analysts at Bernstein observe growing institutional adoption as investors seek alternative macro-hedging tools.
Pick the topics you care about. Get only what matters, on your cadence.