The Commodity Futures Trading Commission (“CFTC” or “Commission”) published an Advance Notice of Proposed Rulemaking (the “APNR”) in the Federal Registrar on March 12, 2026, seeking broad public input on event contract derivatives traded on prediction markets. This is a foundational step toward building a more federally regulated environment for prediction markets arising from sports and other similar events. The APNR signals the CFTC’s intent to claim exclusive jurisdiction over the prediction markets, casting doubt on state-level efforts to regulate them as gambling. This is a significant new phase in the Commission’s approach to regulating this rapidly growing sector and follows the CFTC’s February 2026 withdrawal of a prior proposed rule on event contracts. Comments from the public are due by April 30, 2026. This is an opportunity for stakeholders to provide input on the future of prediction markets.
Overview of the APNR
The CFTC classifies prediction markets as designated contract markets (“DCMs”) or swap execution facilities (“SEFs”) that allow participants to buy and sell contracts—known as event contracts—based on whether specified events occur. The CTFC’s position in the APNR is that these contracts may be classified as swaps or futures contracts under the Commodity Exchange Act (“CEA”) and therefore may be subject to the CFTC’s jurisdiction.
The Commission has observed a dramatic rise in the number and variety of event contracts listed for trading on prediction markets in recent years and there is extensive litigation in several jurisdictions regarding, in particular, the legality of such prediction markets under various state sports betting laws. Several market participants are directly challenging the authority of various state regulators to either regulate or outright ban such event contracts and the litigation is sure to continue. The Commission also reports a more than doubling of DCM registration applications over the past year, largely from entities interested primarily or exclusively in operating prediction markets.
Perhaps recognizing the currently unclear status of event contracts and such prediction markets in various states and courts, the APNR represents a comprehensive effort to gather information and public comment before the Commission may take further regulatory action. It is possible, for instance, that the Commission may use the information and comments received in response to the ANPR to inform potential future agency action, including possible rulemaking with respect to prediction markets. Such a step would likely have a profound impact on not only prediction market participants but on such participants’ arguments with state regulatory agencies and market participants in the regulated sports wagering and internet casino sectors.
Scope of the ANPR
The ANPR poses detailed questions across six broad topic areas:
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Core Principles and Commission Regulations. The Commission seeks input on how the existing DCM Core Principles under CEA section 5(d) should apply to prediction markets, including impartial access and abusive trade practices, contract resolution criteria, susceptibility to manipulation, market surveillance and enforcement, position limits, financial integrity and margin trading, operational risk, and the unique considerations arising from blockchain-based prediction markets. The ANPR also seeks comment regarding the application of the derivatives clearing organization (“DCO”) Core Principles and the SEF Core Principles to prediction market activity, as well as broader regulatory requirements related to swap data reporting, competitive execution, and disruptive trading practices.
It is noteworthy that the CFTC has solicited comments on financial integrity and margin trading. Margin trading has been a longstanding feature of the futures market. Preserving the financial integrity of a futures clearinghouse, which is intended to be inviolable, depends on a robust margin regime that can be repriced daily based on a liquid market that maintains a reliable price discover mechanism. This ensures that, when a contract position is closed out because a party defaults, the clearinghouse through a combination of the margin it holds and covering its position in the liquid market should be able to avoid taking a loss. How this traditional margin mechanism could be adapted to the prediction markets is a topic that bears close attention. The implication of margin trading in the prediction markets is that, unlike “bets” and “wagers” made in the gaming industry, a party would not be required to place at risk the full amount it is prepared to lose on day one, but only what the margin regime requires. The prospect of allowing margin trading in the prediction markets could exacerbate the fault line that has emerged between the CFTC’s regulatory sphere and the gaming law regimes that prevail at the state level.
- Public Interest Determinations. CEA section 5c(c)(5)(C) grants the CFTC authority to prohibit certain event contracts it determines are “contrary to the public interest.” The ANPR seeks comment on what factors the Commission should weigh in making this determination, how the public interest purposes of the CEA, including price discovery, hedging, market integrity, and the promotion of responsible innovation, should inform the analysis, and whether elements of the former “economic purpose” test should play any role.
- Prohibited Activities. The ANPR requests input on the scope and public interest implications of the five activities enumerated in CEA section 5c(c)(5)(C) that may render an event contract contrary to the public interest: (i) activity that is unlawful under federal or state law, (ii) terrorism, (iii) assassination, (iv) war, and (v) gaming. The Commission asks particularly detailed questions about the meaning of “gaming,” including whether it is synonymous with gambling, how various types of contests should be distinguished, what responsible gaming standards should be considered, and whether the demographics of prediction market participants (who may skew younger) warrant additional attention. The ANPR also asks whether additional activities should be deemed “similar” to the enumerated categories and thus subject to prohibition.
- Procedural Aspects. The Commission asks when in the listing process a public interest determination should occur, whether such determinations can be made with respect to categories of event contracts rather than individual contracts, and how the statutory 90-day review period should shape the Commission’s procedures.
- Inside Information. The ANPR raises important questions about trading by individuals who possess nonpublic information relevant to the outcomes of event contracts, including the risk of manipulation and the application of existing CEA provisions prohibiting the misuse of inside information by federal government employees and officials.
- Cost-Benefit Considerations. Throughout the ANPR, the Commission invites commenters to provide data, studies, and specific information regarding the costs and benefits of any potential regulatory changes, consistent with the requirements of CEA section 15(a).
Innovation Task Force
In addition to the ANPR, on March 24, 2026, Chairman Michael S. Selig announced the launch of the CFTC’s Innovation Task Force, a dedicated initiative charged with developing clear regulatory frameworks, including for prediction markets and event contracts. The Innovation Task Force, led by senior advisor Michael J. Passalacqua, will work in partnership with the Commission’s Innovation Advisory Committee and coordinate with other federal agencies. Chairman Selig noted that by “establishing a clear regulatory framework for innovators building on the new frontier of finance, we can foster responsible innovation at home and ensure American market participants are not left on the sidelines.” The Task Force’s launch underscores the Commission’s broader commitment to engaging directly with market participants as it shapes the regulatory landscape for prediction markets.
Takeaways and Next Steps
The ANPR represents a significant opportunity for market participants, prospective prediction market operators, and other interested stakeholders to shape the Commission’s regulatory approach at a very early stage. A few practical points are worth highlighting:
- The comment deadline of April 30, 2026, provides a limited window for stakeholders to weigh in.
- The breadth of the ANPR’s questions—spanning market structure, manipulation, public interest, gaming, inside information, margin, and cost-benefit analysis—means that a wide range of industry participants may have relevant perspectives to contribute, including existing and prospective DCM and SEF operators, clearing organizations, technology firms, institutional traders, and retail market participants.
- Because the ANPR contemplates that comments could inform future rulemaking, the comment process is a critical juncture for stakeholders who wish to influence the regulatory framework before more specific rules are proposed. Comments that include supporting data, studies, or concrete cost-benefit analysis are likely to carry particular weight.
Further contributions to this article by David H Kaufman, R Andrew Arculin, Nicholas C Guth
