CFTC proposes new prediction market rules, reversing 2024 ban

The Commodity Futures Trading Commission proposed new rules for prediction markets that would allow sports betting contracts under federal oversight while targeting manipulation and fraud, a full reversal of a 2024 ban that had lumped such contracts together with gambling.

"Federal preemption is essential to prevent a patchwork of state-level restrictions that would undermine market integrity and cede ground to offshore competitors," the CFTC said in its proposal, which entered review at the White House Office of Management and Budget around May 26. President Donald Trump publicly endorsed the agency's exclusive federal authority over prediction markets in a Truth Social post the same day, calling for a unified national framework.

The framework builds on an Advance Notice of Proposed Rulemaking issued in March 2026 that sought public comments on how event contracts should operate, with particular attention to insider trading and fraud risks. The comment period closed April 30. Under the new approach, platforms like Kalshi — a CFTC-registered designated contract market since 2020 — and Polymarket, which achieved DCM status in 2025, would face clearer parameters around permissible contracts rather than the categorical prohibitions of the prior regime.

The proposal marks a significant shift for an industry that has spent years navigating a patchwork of state laws and federal uncertainty. The 2024 ban had effectively blocked sports-related event contracts across all CFTC-regulated platforms, pushing some trading activity to offshore venues beyond the agency's reach. For Kalshi, federal preemption would remove many state-level obstacles constraining its growth. For Polymarket, the blockchain-based platform that gained prominence during the 2024 election cycle, regulatory clarity could influence the timing and structure of its planned native POLY token.

The core of the proposal defines what the CFTC has called "rules of the road" for prediction market operators. That means establishing clear responsibilities for platforms, outlining which contract types are permissible, and specifying what constitutes manipulation. The rescission of the 2024 ban on sports-related contracts is the headline change — the previous administration had treated such contracts as too close to gambling for regulatory comfort, while the new framework treats them as financial contracts subject to the same anti-fraud and anti-manipulation rules that govern other CFTC-regulated products.

Who benefits, who loses

The platforms best positioned under the new framework are those already operating within the CFTC's regulatory perimeter. Kalshi, which has been a registered DCM since 2020, stands to gain the most from federal preemption of state-level gambling laws that have constrained its product lineup. Polymarket, which secured DCM status in 2025 after operating for years in a regulatory gray area, would also benefit from clearer rules. The proposal does not address the status of unregistered offshore platforms, leaving a potential competitive gap that could persist until international coordination or enforcement actions close it.

What comes next

The OMB review process typically takes 30 to 90 days. After that, the CFTC will publish a formal notice of proposed rulemaking, triggering another public comment period. Industry participants expect final rules to take effect sometime in 2027, though the timeline could shift depending on the complexity of comments received and any congressional scrutiny. The last time the CFTC attempted to define permissible event contracts — during the 2024 ban — the agency faced legal challenges and pushback from platforms that argued the prohibition exceeded its statutory authority.

This article is for informational purposes only and does not constitute investment advice.