The U.S. Commodity Futures Trading Commission proposed its first regulation of market prediction on Wednesday, pitching an approach for how it can conduct widespread evaluations of whether contracts trip the federal standard for what is off-limits.
The agency that regulates US derivatives has been a defender of prediction markets like those run by Kalshi, Polymarket and Crypto.com, with Chairman Mike Selig making them a top legal and regulatory priority for the CFTC. He has promised a new, tailored regulatory scheme for the industry, and the new proposal addresses some of what could be more rules the regulator is pursuing.
“The CFTC will protect the integrity of our regulated markets without standing in the way of responsible innovation,” Selig said in a statement. “This proposal gives the commission a durable, transparent framework for identifying the contracts Congress has asked us to scrutinize, while allowing legitimate markets to move forward.”
Federal law states that contracts involving war, terrorism, assassination, illegal activity and gambling may be considered outside the public interest and not permitted. In practice, and in its recent embrace of data sharing agreements with professional sports leagues, the CFTC has embraced the massively growing field of sports betting as an obvious public interest.
The platforms on which event contracts are traded are regulated exchanges under the CFTC, and the agency has said that exchanges are the first line of defense in determining whether contracts are legal and markets are not being manipulated or abused.
The proposal emphasizes a 90-day review process on public interest determinations for individual contracts.
President Donald Trump has recently expressed support for the path Selig has been on, saying in a social media post that “Other countries are after this new kind of financial market, and we want to stay on top.”
