CFTC Takes Additional Steps Toward Prediction Market Regulation: What You Need to Know

Overview

On March 12, 2026, the U.S. Commodity Futures Trading Commission (CFTC) took formal steps toward establishing additional regulations for prediction markets. The agency issued an Advanced Notice of Proposed Rulemaking (ANPRM) soliciting public input on potential new rules, and separately, released staff guidance outlining its views on how existing rules apply to prediction market platforms currently in operation. These developments signal a significant shift in the regulatory landscape for an industry that has grown rapidly over the past year.

Key Developments

1.1. Advanced Notice of Proposed Rulemaking (ANPRM)

The CFTC's ANPRM formally opens the public comment process on what a U.S. federal regulatory framework might look like for prediction markets. CFTC Chair Michael Selig described the notice as “an important step in the commission’s continued effort to promote responsible innovation in our derivatives markets.”

The ANPRM poses several critical questions to the public, including, among other things:

• Whether prediction market platforms should be permitted to offer trading on margin;
• What types of contracts should be prohibited on public interest grounds; and
• Whether individuals with insider knowledge of certain events should be barred from trading on related contracts.

The CFTC noted that applications to register as designated contract markets (DCM) — a CFTC regulatory category that can cover the operation of a prediction market in the United States — have more than doubled over the past year, with the majority submitted by entities interested in operating primarily or exclusively as prediction markets. This surge in registration activity underscores the urgency of regulatory clarity around event contracts traded on prediction markets.

1.2. Staff Guidance on Event Contracts

Alongside the ANPRM, the CFTC’s Division of Market Oversight (DMO) issued staff guidance (Guidance) focused on events contracts. The Guidance initially notes that “event contracts” could come within the Dodd-Frank Act’s broad definition of a “swap”:

While the term ‘‘event contract’’ is not a defined term in the CEA or the Commission’s regulations, event contracts are a type of derivative contract, often a swap with a binary payoff structure, whose settlement is based on the outcome of an underlying occurrence or event. As amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the ‘‘Dodd-Frank Act’’), the statutory definition of “swap” in section 1a(47) of the CEA is deliberately broad. As such, it can encompass event contracts within multiple sub-definitions.” (Guidance at 2.)

The Guidance also noted that sports-related event contracts could be consistent with CFTC regulatory requirements:

Sports-related event contracts and event contracts more generally have often been shown to be consistent with DCM Core Principle 3 where the settlement outcome depends on the aggregate performance of multiple participants over an extended period of play. The breadth of the outcome, in the typical case, reduces the ability of any single actor to manipulate the settlement value without material cost or substantial risk of detection. These categories of event contracts have been self-certified by DCMs pursuant to Commission Regulation 40.2 (Guidance at 5.)

The Guidance emphasizes the need for DCMs to ensure that they are complying with the CFTC’s regulatory “Core Principles”. Core Principles include responsibilities relating to market surveillance, market manipulation prevention, and product review and submission. Key points from the Guidance relating to these Core Principles include:

• Manipulation risk assessment: Platforms are encouraged to evaluate whether specific types of contracts carry a heightened risk of manipulation or distortion. The guidance specifically flags contracts that:
• Resolve based on injuries to individual sports participants;
• Involve unsportsmanlike conduct or physical altercations; and
• Settle based on the actions of a single individual or small group, such as officiating decisions.

For such event contracts that present a heighted potential for manipulation or price distortion, DMO encourages DCMs to engage with sports leagues, including through entering into information sharing arrangements to obtain data to help determine fair prices for those contracts and potentially obtaining information from sports leagues about categories of individuals who should be restricted from trading in certain sports-related event contracts. DCMs are also encouraged to engage with DMO staff early in the process, including when designing such contracts, to assess if such heightened risk exists, and potential mitigation measures or controls

• Insider Trading: The DMO staff reminded DCMs and market participants that CFTC regulations, specifically, 17 C.F.R. § 180.1, makes it “unlawful for any person to employ any device, scheme, or artifice to defraud or attempt to defraud any person or manipulate the price of any contract listed on a DCM,” and that this includes “misappropriation of confidential information in breach of a preexisting duty of trust and confidence to the source of the information” – which is commonly called “insider trading.” The guidance reiterates that the CFTC has the authority to investigate and pursue civil enforcement in connection with such activity.
• Exclusive jurisdiction: The Guidance is consistent with the CFTC's position that it has exclusive jurisdiction over event contracts, and therefore, prediction markets, a stance the CFTC has recently advanced as amicus curiae in federal appellate litigation against state regulators in Nevada before the Ninth Circuit, and which position has been asserted by various prediction market operations against state regulators across the country.

Legislative And State Level Developments to Watch

Congress is moving in parallel, with two notable bills introduced this week:

• The DEATH BETS Act (Discouraging Exploitative Assassination, Tragedy and Harm Betting in Event Trading Systems Act): Introduced March 10, 2026, this bill would amend the CEA to explicitly prohibit CFTC-registered platforms from listing contracts involving or referencing terrorism, assassination, war, or death. As noted by the Guidance, the CEA at 7 U.S.C. 7a-2(c)(5)(C), prohibits such event contracts, if the CFTC determine that such an event contract is “contrary to the public interest.” Such legislation would essentially remove the CFTC’s discretion and would by statute prohibit such event contracts.
• The Prediction Markets Security and Integrity Act (introduced by Sen. Richard Blumenthal, D-Conn.): This bill targets insider trading on prediction markets, seeks to enhance customer protections, and would explicitly reverse the CFTC’s claimed preemption of state gambling regulations — directly challenging the agency's exclusive jurisdiction claims.

These legislative efforts reflect skepticism of the CFTC’s attempt to federalize oversight of prediction markets, particularly around sports gaming, which has traditionally been overseen by state gaming authorities (and similar bodies). Consistent with this tug-of-war between competing regulators, multiple Attorneys General across the country have expressed their concern with prediction markets and sports gaming. While some AGs have explicitly stated that their offices would investigate, pursue and/or enforce illegal or deceptive conduct and activity on these platforms under their various consumer protection enforcement authority, others have already commenced enforcement actions against actors in these spaces.

Ongoing Jurisdictional Litigation

The question of whether federal or state law governs prediction market platforms is being actively litigated across multiple federal circuits:

• The Ninth Circuit is considering whether Nevada regulators may pursue enforcement against a prediction market;
• The Third Circuit is weighing whether states can ban sports betting on prediction markets; and
• The Sixth Circuit has been asked to review a ruling permitting Ohio to apply its gambling laws to such platforms.

The outcome of these cases will have profound implications for market participants operating across state lines.

Implications for Clients

This regulatory moment presents both opportunities and risks for businesses operating in or considering entry into the prediction markets space:

1. Understand Regulatory Implications of your Business Model. The ANPRM plus regulatory guidance offer registered DCMs and potential applicants the opportunity to review their business model to ensure they are adopting an optimal legal structure.
2. Review Business Opportunities. The Guidance suggests that DCMs will need to obtain appropriate information as part of their market surveillance and anti-manipulation responsibilities. These needs may create potential business opportunities for third parties.
3. Engage in the ANPRM process. The public comment process is an important opportunity for industry participants to shape the rules that will govern their operations. Traditional gaming operators or DCM applicants and registrants should consider submitting comments.
4. Review Compliance with the CFTC Core Principles. In light of the staff guidance, platforms should conduct a thorough review of their existing and planned contract offerings and processes for compliance with the CFTC Core Principles and more broadly the CEA.
5. Track the Legislative and Judicial Landscape. The dual legislative proposals and multiple pending appellate court cases could rapidly alter the federal-state jurisdictional balance. Clients should have contingency plans in the event that state regulators are afforded a greater role in oversight.
6. Registration Considerations. Given the doubling of DCM registration applications, companies that have not yet initiated the registration process should consider doing so promptly to demonstrate good-faith regulatory compliance and secure favorable positioning as formal rules take shape.

Looking Ahead 

The CFTC's actions this week represent the opening salvo of what is likely to be a multi-year rulemaking process. The timeline for potential final rules will depend on the volume and nature of public comments received, the outcome of pending litigation, and possible legislative developments from Congress. We expect the CFTC to remain active in asserting its jurisdiction in the interim, both through continued staff guidance and through participation in judicial proceedings, as noted above.