CFTC Starts Rulemaking Process for Prediction Markets

TLDR

• The CFTC issued a staff advisory and launched a formal rulemaking process for prediction market platforms.
• Chairman Mike Selig said the agency will exercise exclusive jurisdiction over prediction markets in the United States.
• The regulator set a 45-day deadline for public comments on its advanced notice of proposed rulemaking.
• The advisory requires designated contract markets to list contracts that are not readily susceptible to manipulation.
• The CFTC directed platforms offering sports contracts to communicate with relevant sports governing bodies.

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The Commodity Futures Trading Commission (CFTC) has issued new guidance for prediction market firms operating in the United States. The agency released a staff advisory and launched a formal rulemaking process. The move follows a shift in policy under Chairman Mike Selig and sets a 45-day deadline for public comment.

CFTC Outlines New Framework for Prediction Markets

Chairman Mike Selig directed the agency to publish a non-binding staff advisory for designated contract markets. The advisory explains how platforms must seek approval for new trading products. It also states that firms should list contracts that are not readily susceptible to manipulation.

Selig said, “This begins the process of new rulemaking grounded in a rational and coherent interpretation of the Commodity Exchange Act.” He added that the agency will exercise its exclusive jurisdiction over prediction markets. The commission issued the document as an advanced notice of proposed rulemaking and invited public input.

The CFTC stated that the number of applications for DCM registration has more than doubled in the past year. It said many applicants seek to operate prediction market platforms. The 32-page document presents questions that will guide a future proposal and later, a final rule.

The agency set a 45-day window for public comments on the proposal. That timeline suggests the regulator wants to move the process forward quickly. The next stage will include a detailed proposal followed by a final rule under administrative law.

Polymarket and Kalshi Adjust to New Oversight

The advisory applies to DCMs that include Kalshi, Coinbase, and Polymarket. The CFTC directed these firms to follow clear procedures when listing new contracts. It also reminded them of their legal duty to monitor trading activity for manipulation.

Kalshi recently announced that it punished two customers for rule violations. The agency cited that action as evidence that platforms must police their markets. The CFTC stated that firms engaging in this business carry responsibility under the Commodity Exchange Act.

The guidance also addresses sports-related contracts listed on these platforms. The CFTC said firms should communicate with relevant sports governing bodies when developing terms and oversight programs. The agency linked that requirement to compliance and market integrity standards.

Selig now leads the CFTC as its only sitting commissioner. The commission is designed to have five members, yet only Selig currently serves. He has argued in court filings that the CFTC holds sole jurisdiction over sports event contracts.

Several states have sued prediction market providers over sports-related offerings. Selig filed a recent brief asserting federal authority in that area. The agency continues to collect comments before drafting the next phase of its rule proposal.

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