Key Takeaways:
The CFTC told Kalshi, Polymarket and Crypto.com to stop using template-style certifications for event contracts — its second warning in four months.
The Commodity Futures Trading Commission on Friday warned prediction market operators against submitting broad, template-style self-certifications for event contracts, the agency's second such advisory in four months.
"Broad, template-style certifications should not be submitted," the CFTC said in its July 24 advisory, which applies to designated contract markets operated by Kalshi, Coinbase, Polymarket and Crypto.com.
The agency said many platforms continue to self-certify event contracts "without supplying the terms and conditions of each proposed permutation and a concise explanation and analysis" of the product's compliance with the Commodity Exchange Act. The advisory comes ahead of a July 27 deadline for public comments on proposed rule amendments that would establish a three-step analytical framework for determining whether certain event contracts are contrary to the public interest.
The CFTC's heightened scrutiny could slow the pace at which prediction markets list new contracts tied to breaking news, political developments or sporting events, potentially compressing a key competitive advantage for platforms that rely on speed to market. The agency's authority over the sector remains legally contested, with Chairman Mike Selig pushing for federal primacy while several states pursue the businesses on allegations of illegal sports gambling.
The regulator issued a similar advisory on March 12, showing the industry's self-certification practices have not improved. The CFTC said closely related event contracts may still be certified as a class when they share meaningful features and are supported by common exhibits, but generic templates covering unrelated events will face greater scrutiny.
The proposed rule amendments, if adopted, would fundamentally reshape how prediction markets operate, according to law firm Ropes & Gray. The framework would assess contracts based on their involvement in activities like terrorism, assassination or gaming, ensuring only appropriate contracts are listed for trading.
The jurisdictional conflict over who regulates sports-based event contracts remains unresolved. The CFTC argues that federally regulated exchanges fall under its exclusive jurisdiction when offering approved or self-certified contracts. Several states reject that interpretation, and the dispute could eventually reach the U.S. Supreme Court.
In a separate action Friday, the CFTC extended the dormant designation of the Kraken Derivatives Exchange, whose last trade was completed in early 2025. Kraken requested additional time to evaluate the platform's future after acquiring Bitnomial earlier this year, keeping the exchange's regulatory standing intact without requiring an immediate return to active trading.
This article is for informational purposes only and does not constitute investment advice.
