The US CFTC initiates regulatory action on prediction markets, with event contract rules potentially undergoing significant adjustments

On March 13, the U.S. Commodity Futures Trading Commission (CFTC) announced a new regulatory initiative aimed at strengthening oversight of prediction markets and event contracts. CFTC Chair Michael Selig stated that this marks a move by regulators to take more proactive measures after years of observation, to clarify compliance frameworks for these markets.

According to CFTC Market Oversight Letter No. 26-08, registered trading platforms must adhere to stricter compliance and listing standards when launching event contract products. Event contracts are derivatives whose payoffs depend on real-world outcomes, involving scenarios such as sports competitions and political elections. The agency also issued a proposed rulemaking pre-notice (ANPRM), inviting public comments on whether new rules should be created or existing regulations revised, with a 45-day comment period.

Selig shared on social media that prediction markets have long been established financial tools. Under his leadership, the CFTC will maintain regulatory authority over these markets and promote their legitimate development in the U.S. He has recently emphasized that prediction markets are increasingly viewed by investors as more valuable data sources than traditional political polls.

However, the regulatory jurisdiction of prediction markets remains controversial. Some U.S. state governments believe these products are essentially similar to sports betting and should fall under gambling regulation rather than financial derivatives. Online gambling and financial industry consultant Peter Harmon noted that this CFTC action mainly reaffirms existing rules rather than proposing new regulatory approaches.

Harmon stated that current regulatory disputes mainly concern sports prediction markets. For prediction contracts related to political or economic events, CFTC’s authority is generally undisputed. But whether sports event predictions should be classified as financial derivatives remains debated. He pointed out that in most Western countries, such activities are typically regulated as gambling.

The regulatory move also reminds trading platforms that insider trading, price manipulation, and the use of confidential information for profit are also applicable to the event contract markets. The CFTC warned that if products do not meet compliance standards, regulators have the authority to suspend or restrict their trading. Analysts believe that as prediction markets grow, U.S. regulators may further clarify the legal boundaries of this industry.