The Commodity Futures Trading Commission issued new guidance Thursday addressing how exchanges should list prediction market contracts. The move signals closer regulatory oversight as event-based derivatives trading volumes surge across digital platforms.
The advisory was published by the agency’s Division of Market Oversight. It reminds exchanges designated as contract markets that prediction contracts must comply with requirements under the Commodity Exchange Act and existing CFTC rules.
Prediction markets allow traders to buy derivatives tied to real-world outcomes such as elections, economic data releases, or sporting events. Platforms offering these contracts are responsible for ensuring listed markets cannot be easily manipulated.
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CFTC Chair Mike Selig said regulators are working to establish clearer guardrails for the sector. Exchanges must evaluate whether contracts could create incentives for participants to influence real-world events before approving them.
The agency highlighted potential risks in contracts tied to narrow outcomes, including individual sports injuries or disciplinary actions. Such structures could create manipulation incentives or abusive trading patterns.
Regulators have faced mounting pressure as prediction markets expand. Combined monthly trading volume on Kalshi and Polymarket reached roughly $18.6 billion in February, marking a sixth consecutive monthly record according to industry data.
Recent controversies have intensified scrutiny. Blockchain analytics firm Bubblemaps flagged a cluster of wallets that reportedly earned about $1 million betting on a Polymarket contract tied to a possible U.S. strike on Iran shortly before airstrikes occurred.
“It’s really important that we don’t have manipulation and insider trading and all sorts of abuse in our derivatives markets,” Selig said in an interview on CNBC’s Squawk Box.
Lawmakers are also weighing new restrictions. Democratic legislators recently introduced a proposal known as the Death Bets Act, which would ban prediction contracts tied to death, war, or assassination events.
The guidance arrives alongside deeper regulatory coordination. The CFTC and the U.S. Securities and Exchange Commission signed a memorandum this week to collaborate on oversight of emerging financial technologies, including digital asset markets.
The next catalyst may come as exchanges revise listing standards for event-based contracts while regulators evaluate whether new legislation is required to govern the expanding prediction market sector.
