ProphetX Secures CFTC Approval To Enter US Prediction Markets

ProphetX has received approval from the US Commodity Futures Trading Commission (CFTC) to operate as both a Designated Contract Market (DCM) and a Derivatives Clearing Organisation (DCO).

The approvals allow the company to transition from its previous sports betting exchange and sweepstakes model into a federally regulated prediction market platform. Under the new structure, ProphetX will be able to offer event-based trading products under federal oversight and potentially expand its services across the United States.

The move comes as prediction markets attract interest from investors, traders and sports fans. Unlike traditional sportsbooks, regulated at the state level, prediction market operators fall under federal commodities regulations overseen by the CFTC.

According to ProphetX, the approvals provide a pathway to expand its sports-focused prediction market offering across the US.

ProphetX Continues Strategic Shift Away From Sports Betting

The company originally launched as Prophet Exchange, a peer-to-peer sports betting platform where customers wagered directly against one another instead of betting against a sportsbook. 

As regulatory scrutiny increased, the business later pivoted towards a sweepstakes-based model that allowed users to purchase tokens linked to prize entries. ProphetX plans to pause platform activity temporarily while transitioning to its new legal framework. 

The company expects the migration process to be completed early next week. Existing users will not need to take any action, with account balances and user information automatically transferred to the new platform.

This move follows a trend within the prediction market sector as companies such as Novig and Sporttrade pursue similar federal approvals and seek alternatives to state-by-state gambling regulation.

New CFTC Framework Creates Clearer Rules For Event Contracts

ProphetX’s approval follows the CFTC publishing its proposed framework for regulating event contracts. The proposal opened a 45-day public consultation period and is widely viewed as a major regulatory development in the sector’s history.

Under the framework introduced during Chairman Michael Selig’s tenure, the regulator adopted a more lenient stance toward prediction markets. The proposal distinguishes between contracts based on sporting outcomes and markets considered vulnerable to manipulation or public interest concerns.

According to the draft rules, contracts based on team results, point spreads and other collective sporting outcomes may be permitted because they contribute to price discovery and information gathering.

At the same time, the framework proposes prohibitions on markets linked to athlete injuries, referee decisions, wars and terrorism-related events. Election markets would continue to be treated differently from traditional gambling products.

Despite the additional clarity, legal uncertainty remains. Several state attorneys general are suing the CFTC, arguing that sports event contracts conflict with state gambling laws and consumer protection frameworks. The Supreme Court will decide whether prediction markets can offer sports contracts.

Competition Intensifies As Prediction Market Sector Expands

The US prediction market sector has expanded rapidly since federal regulators began approving sports-related contracts in early 2025. 

Kalshi dominates the market, accounting for an estimated 90% of domestic prediction market trading volume, according to analysis from Bank of America. However, competition is increasing as operators seek a share of the market. 

Polymarket, DraftKings, Fanatics and FanDuel are all expected to boost their presence, while companies such as Sporttrade, Novig and ProphetX pursue federal approval. Sports contracts are the industry’s primary growth driver, accounting for approximately 80% of trading volume on leading platforms. 

As more operators enter the space, the sector is evolving beyond a market dominated by one or two platforms. These new companies will focus on specialised products, technology innovation and differentiated user experiences, which in turn grows the industry. 

ProphetX has secured approval from the CFTC to launch its predictions market platform. This allows the company to expand its offerings from sports betting and sweepstakes products to sports contracts. The approval follows the CFTC releasing a publication of their proposed frameworks for prediction markets despite pushback from several states.