CFTC Issues Notable Prediction Markets Advisory and Advance Notice of Proposed Rulemaking

On March 12, 2026, the Commodity Futures Trading Commission (CFTC) issued two noteworthy releases on event contracts and prediction markets: (1) an advisory from the CFTC’s Division of Market Oversight (DMO) providing guidance to designated contract markets (DCMs) on the listing and trading of event contracts with particular focus on those related to sports (the “Advisory Letter”)[1], and (2) the Advance Notice of Proposed Rulemaking seeking public comment on the need to amend or issue new regulations concerning event contracts trading on prediction markets (ANPRM).[2] These two releases come at a critical time as the jurisdictional dispute between the federal government and the states over event contracts and prediction markets continues.[3]

Key Takeaways

• The CFTC’s Advisory Letter and the ANPRM make it clear that the CFTC intends to exercise exclusive jurisdiction over the regulation of prediction markets, despite continued legal challenges from states, such as Nevada and Arizona.[4] 

• DCMs that offer event contracts trading on prediction markets have a continued obligation to comply with the CFTC’s Core Principles (i.e., its principles-based regulatory requirements for markets), including by only listing contracts that are not readily susceptible to manipulation and engaging in real-time monitoring of all trading activity.

• For sports-related event contracts, the CFTC encourages DCMs to engage with sports organizations during pre-self-certification, consider their integrity standards, and cooperate with them on investigations into potential manipulation and insider trading.

• The CFTC seeks public comment on the application of DCM Core Principles to prediction markets, public interest considerations, and insider trading concerns related to prediction markets, the scope of the five prohibited activities under Commodity Exchange Act (CEA) Section 5c(c)(5)(C), and the differences between prediction markets and other markets.

• Prediction markets and sports-related event contracts are likely to remain an area of focus for both the CFTC and the public with more developments to come in the near future.

The Advisory Letter – A Reminder to DCMs of Their Core Principle Compliance Obligations and a Recommendation that They Engage and Cooperate with Sports Organizations

The Advisory Letter reiterates the Core Principle compliance obligations of DCMs in the context of event contracts and prediction markets. Specifically, it reminds DCMs of their duty to conduct real-time monitoring of all trading activity on their trading platforms to identify disorderly trading and any market or system anomalies. It also emphasizes DCMs’ responsibility to engage in appropriate inquiries and undertake disciplinary actions when necessary. Further, the Advisory Letter states that the CFTC regulations prohibit the employment of 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 the CFTC retains the authority to investigate and bring civil enforcement actions related to such activity.

Importantly, the Advisory Letter encourages DCMs to consider whether certain categories of event contracts create a heightened potential for manipulation or price distortion. On this note, it focuses on sports-related event contracts that may be susceptible to resolution or settlement based on injuries to individual sports participants, unsportsmanlike conduct, or physical altercations between sports participants. It also highlights those contracts that resolve or settle based on the action of a single individual or a small group of individuals, such as officiating actions occurring during a sporting event. Relatedly, the Advisory Letter notes that the listing of event contracts should avoid overly broad or general contract specifications and include, among other things, a description of the settlement methodology that accounts for differing potential permutations of the contract, including identification of the specific data sources on which settlement will be based, and an assessment of the reliability, objectivity, and manipulation resistance of such sources.

Notably, the Advisory Letter also recommends that DCMs offering sports-related event contracts consider (1) engaging in pre-self-certification communications with relevant sports governing bodies or authorities when developing terms and conditions, compliance, and market oversight programs for sports-related events contracts; (2) including, as part of the self-certified product submission, an explanation of whether the contract is consistent with the relevant league’s or governing body’s integrity standards, as applicable; (3) establishing information-sharing and data arrangements with the relevant sports integrity monitoring organization; and (4) relying on official data provided by the relevant league or governing body, as applicable, as the settlement source.

The ANPRM – An Acknowledgment of the Rise of Prediction Markets and an Attempt to Gain Public Insight to Determine the Best Way to Regulate Them

The ANPRM recognizes that prediction markets have surged in popularity, with event contract listings increasing from approximately five per year between 2006 and 2020 to approximately 1,600 in 2025. As these markets have become more widespread, so have questions regarding the appropriate regulatory entity that is legally authorized to exercise jurisdiction over them. At the center of this dispute is the CFTC and the states, particularly Nevada and Arizona, where sports-related event contracts are especially popular and could be viewed by some as competing with traditional gambling offerings. The state regulatory agencies have grown increasingly vocal in their desire to oversee prediction markets as they do sports betting pursuant to their gambling statutes. However, the CFTC has maintained its position that it holds exclusive jurisdiction over prediction markets, as emphasized in the ANPRM, on the basis that event contracts are either swaps or futures contracts.[5]

In an attempt to broadly regulate prediction markets under its perceived exclusive jurisdiction, the CFTC is requesting public comment in the ANPRM on 40 questions covering a wide range of topics, including the following:

1. The application of DCM Core Principles to prediction markets;
2. The factors to consider in determining whether a contract is “contrary to the public interest”;
3. The standards for determining the scope of the five prohibited activities that cannot underlie event contracts under CEA Section 5c(c)(5)(C) (i.e., activities that are unlawful under federal or state law, terrorism, assassination, war, and gaming);
4. The treatment of insider information in the context of prediction markets; and
5. The aspects of prediction markets that make them different from other CFTC-regulated markets.

These topics reflect the CFTC’s concern with how prediction markets fit (or do not fit) into its existing regulatory framework and whether there are any outstanding risks to the integrity of markets, protection of customers, and vibrancy of the overall financial system that need to be addressed in a future rulemaking. The ANPRM provides a 45-day comment period following its publication in the Federal Register for the public to raise these concerns and provide other insights on prediction markets to the CFTC.

[1] CFTC Letter No. 26-08, Prediction Markets Advisory (Mar. 12, 2026).

[2] CFTC Advance Notice of Proposed Rulemaking; Request for Comment, Prediction Markets (Mar. 12, 2026).

[3] See CFTC Amicus Brief, North American Derivatives Exchange, Inc. et al. v. The State of Nevada on relation of the Nevada Gaming Control Board et al., No. 25-7187 (Feb. 17, 2026).

[4] See, e.g., State of Nevada ex rel. Nevada Gaming Control Board v. KalshiEx, LLC (Feb. 17, 2026); KalshiEx, LLC v. Jackie Jackson, et al. (Mar. 12, 2026).

[5] The ANPRM notes that certain event contracts could be considered security-based swaps under the jurisdiction of the U.S. Securities and Exchange Commission.