Lynnae Williams Journalist
Lynnae is a journalist covering the intersection of technology, culture, and gambling. She has more than five years of experience as a writer and editor, with bylines at SlashGear and MakeUseOf. On the iGaming side,...
Read Full BioThe Commodity Futures Trading Commission’s much-anticipated public comment period on prediction markets is finally here. On Thursday, the CFTC formally opened the next phase of its overhaul of prediction markets, publishing an Advanced Notice of Proposed Rulemaking.
The commission is calling on the public to weigh in on how event contracts should be regulated and what boundaries it should set for those markets, including which contracts should be prohibited as “contrary to public interest.”
Publication of the notice follows Chairman Michael Selig’s January announcement that the CFTC would reset its approach to prediction markets and the agency’s formal February 4 withdrawal of both its 2024 event contracts proposal and its 2025 staff advisory on sports event contracts.
As the CFTC opened the comment period, Selig said, “Today’s action is an important step in the Commission’s continued effort 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.”
The public has 45 days from the date of publication in the Federal Register to submit comments in writing via the CFTC Comments Portal.
A 32-Page Notice Packed With Big Questions
The notice is a long read, packed with page after page of questions that run the gamut from how statutory core principles apply to prediction markets and the susceptibility of event contracts to manipulation, to whether the Commission should allow margin trading for retail customers, and how to define the public interest implications of activities like war, terrorism, and gaming.
The notice specifically asks the public to help the CFTC define the scope of terms like “war” and “gaming,” and whether sports competitions should be treated differently from other contests.
In the section titled “Activities Listed in CEA Section 5c(c)(5)(C),” the Commission asks for comment on some of the most controversial topics in prediction markets, including terrorism, assassination, war, and gaming.
Under the war subsection, the CFTC asks the following questions:
- Does this activity encompass all military actions, or are there military actions that do not constitute war?
- What factors distinguish war from, for example, civil unrest? What factors distinguish war from political actions or other actions as part of international relations?
- Are specific definitions in other contexts, such as insurance, helpful?
- What public interest factors should the Commission consider for event contracts involving war?
Questions about responsible gaming standards, including self-exclusion, time and spending limits, advertising restrictions, and warnings, are also raised in the notice.
Another major theme in the notice is insider trading, a topic that has received significant attention on Capitol Hill and from the public in recent months after several unusually well-timed trades related to U.S. military action in Venezuela and Iran resulted in suspected insiders making thousands of dollars in profits.
The CFTC asks whether there’s any public interest in allowing people who have an “asymmetric information advantage” to trade on a specific contract, while acknowledging the risks of unfairness, misuse of nonpublic information, and cross-market manipulation.
It also asks about the impact of nonpublic information available to federal government employees or officials on prediction markets and how the potential application of existing law should inform the Commission’s regulation of those markets.
In the final section, the notice turns to fundamental classification questions, including whether event contracts should be treated as swaps, futures, or something else.
Notice Builds on Selig’s January Reset
The March 12 notice is the latest step in the reset Selig began in January, when he announced that the CFTC would withdraw its 2024 proposed rule that would have restricted political and sports-related event contracts and rescind its 2025 sports advisory.
At the time, Selig said the old framework had created uncertainty and promised new rules that would better reflect the Commission’s view that prediction markets fall within its exclusive jurisdiction as commodity derivatives.
The CFTC’s newly assertive stance on prediction markets, along with yesterday’s announcement, is in line with what former CFTC regulator Carl Kennedy recently told CasinoBeats. “I think what he’s done is kind of set the table for himself,” Kennedy said, describing the shift as a pathway of “withdrawing things, joining in litigation, and now letting you know that our focus is on issuing proposed rules.”
Kennedy also said the next step could be clearer, “listing standards on a categorical basis,” identifying which contracts are “A-OK” and which should trigger a conversation with the commission before going live.
With the public comment period now open, the rulemaking process Selig previewed in January is officially underway, giving the public its first formal chance to weigh in on how the CFTC should regulate prediction markets.
