CFTC Aims to Clear Path for Prediction Market Boom

The Commodity Futures Trading Commission (CFTC) said Thursday (March 12) that it is seeking public comment on whether it should amend or issue new regulations governing event contracts traded on prediction markets.

The regulator also reminded designated contract markets (DCMs) of their obligations under current regulations.

The request for public comment came in an advanced notice of proposed rulemaking (ANPRM) published Thursday, the CFTC said in a press release.

The ANPRM seeks information about several topics, including the application of CFTC regulations to prediction markets, the types of event contracts that may be prohibited because they are contrary to the public interest, and cost-benefit considerations related to prediction markets, according to the release.

The CFTC will use the information gathered from the ANPRM to inform potential future actions, per the release.

CFTC Chairman Michael S. Selig said in the release that the regulator aims to “promote responsible innovation in our derivatives markets.”

“This begins the process of new rulemaking grounded in a rational and coherent interpretation of the Commodity Exchange Act, while reassuring the American people that the CFTC will exercise its exclusive jurisdiction over prediction markets.”

In another move, the CFTC’s Division of Market Oversight issued a prediction markets advisory concerning the listing for trading of event contracts, reminding DCMs about their current regulatory obligations, according to another Thursday press release.

The advisory highlights several regulatory obligations, including ones that require DCMs to establish and enforce rules for trading, monitor trading activity and prevent market manipulation.

“In light of the rapid rise in popularity of prediction markets, the division seeks to encourage growth and innovation in these markets while reminding designated contract markets of their regulatory obligations pursuant to the Commodity Exchange Act and Commission regulations,” the CFTC said in the release.

The CFTC said Feb. 25 that it has full authority to police illegal trading practices on DCMs.

Selig said the same day in a post on X that exchanges are the regulator’s first line of defense against insider trading in prediction markets.

PYMNTS reported in January that prediction markets are breaking into the mainstream and drawing interest from crypto, betting, finance and major institutions despite regulatory risks.

Prediction markets have come under fire from critics for issues around trades on war, perceived similarities to sports betting and other wagering activity, and insider trading.