The US Commodity Futures Trading Commission has outlined a new regulatory roadmap for prediction markets, with Chair Michael Selig promising “clear rules of the road” for event contracts.
Speaking at the CFTC’s inaugural Innovation Advisory Committee meeting on 20 August, Selig said the agency intends to replace years of uncertainty with a framework focused on regulatory clarity, consumer protection and stronger market oversight.
The announcement comes as prediction market platforms face state legal challenges, while operators such as Kalshi argue federally regulated event contracts fall outside gambling laws. Selig used the meeting to defend the CFTC’s jurisdiction, arguing that Congress gave the agency exclusive authority over designated contract markets.
He said some states are trying to apply anti-gaming laws to event contracts despite federal commodities law governing the sector. “Prediction markets are not necessarily new,” Selig said, noting that event contracts have existed in US derivatives markets for decades.
The CFTC intends to defend its jurisdiction in court while supporting lawful innovation.
Rule 40.11 changes would define gaming and public-interest tests
A central part of the roadmap involves proposed amendments to CFTC Rule 40.11, which governs event contracts.
Existing law allows the Commission to prohibit certain contracts involving war, terrorism, assassination, gaming and illegal activity when doing so serves the public interest. Selig argued that the current framework leaves important terms undefined.
“However, our statute does not define key terms like gaming or establish public interest criteria for us to consider,” Selig said. “As a result, contracts are at risk of rejection based on arbitrary whims or political biases and DCMs have been left operating in the dark.”
He also criticised previous efforts to restrict contracts linked to politics, sports and cultural events. “The prior administration attempted to prohibit event contracts on politics, sports, and cultural events in the name of the public interest without ever defining what’s in the public interest,” he said.
Under the proposed reforms, the CFTC would introduce clearer definitions and formal public-interest criteria for assessing future prediction market products.
Consumer protections and reporting requirements will also be strengthened
The roadmap goes beyond deciding which event contracts are permissible. Selig said the CFTC is developing a new reporting framework for fully collateralised event contracts, intended to give regulators better visibility into market activity while reducing compliance burdens.
The Commission is also preparing changes to rules governing designated contract markets that list event contracts. Those reforms would include stronger consumer-protection requirements and clear expectations around product governance, market design and incentive programmes.
Growing retail participation has intensified scrutiny around market integrity, disclosures and safeguards. The CFTC’s approach suggests it wants to address those concerns within the derivatives framework rather than through separate state-by-state rules.
Federal roadmap could strengthen Kalshi in state-level legal disputes
Selig placed prediction markets within what he described as the “new frontier of finance”, plus artificial intelligence, blockchain and digital assets. He argued that innovation and regulation should develop together, warning that unclear rules risk pushing investment and businesses offshore.
This roadmap strongly signals that current CFTC leadership views prediction markets as part of the broader US financial system under federal regulations. The agency has not announced immediate rule changes, but Selig’s remarks point towards a comprehensive framework.
An improved federal framework could reinforce their argument that sports-related event contracts should be governed nationally through the CFTC. The main legal question remains unresolved, particularly for sports-related products that states argue resemble conventional betting.
However, stronger reporting standards and dedicated consumer-protection rules could make the federal position easier to defend.
The CFTC’s roadmap signals the prediction market sector that federal regulators want to build rules around the category. Its major test will be implementing measures that will improve consumer protection and market integrity without creating ambiguity, leading to more legal battles across states.
Share
10 views
