U.S. CFTC Proposes New Prediction Market Rules: Most Sports Betting Contracts to Remain Permitted, War-Related Contracts May Be Banned
N.R. Finch
The U.S. CFTC will propose its first systematic rules for prediction markets on Wednesday — most sports-related contracts stay legal, but bets on war, terrorism, and assassination face near-total bans. This means the regulator chose to draw lines, not shut the industry down.
What is the core logic of the new rules?
The proposal does not blanket-ban any specific type of event contract — a financial instrument that lets people bet on whether something will happen. Instead it lists factors for case-by-case review.
Two core tests: whether a contract serves the public interest, and whether it is highly susceptible to manipulation by a single actor.
This means → the regulator built a "red-line test," not a blacklist. Every contract must clear both hurdles before it can trade.
Which contracts survive, and which get pulled?
Far more will be allowed than banned: CFTC officials said the vast majority of sports-related contracts will continue to operate.
Likely banned: player-injury bets, "first pitch" wagers — one such bet previously implicated an MLB All-Star pitcher — and nearly all contracts tied to war, terrorism, or assassination.
In plain terms = betting on game outcomes is fine. Betting on whether a player gets hurt, or where the next war breaks out, crosses the line — too easy for insiders to exploit, or too dangerous to life.
Why are war-related contracts especially sensitive?
Geopolitical-conflict intelligence often involves classified information. Bettors could profit on non-public intel, and the trades themselves carry life-threatening risks.
In April, a U.S. soldier was charged for allegedly trading on an operation to arrest former Venezuelan president Maduro.
Two members of Congress have already introduced legislation to ban such bets outright on U.S.-regulated platforms. This reflects a bipartisan push — even without the CFTC acting, Congress is tightening this line.
What is the broader backdrop?
Prediction markets expanded rapidly during a regulatory vacuum around Trump's re-election. Platforms like Kalshi and Polymarket rolled out contracts on elections, corporate earnings, and even the Super Bowl halftime show.
The CFTC classifies prediction-market bets as "swaps" — a type of financial derivative. Previous administrations used that classification to block election and sports contracts from listing.
This means → the new rules are the first systematic framework under Michael Selig, the CFTC chair appointed by Trump. The direction is not to shut things down but to set a floor while keeping the door open.
How are platforms and states reacting?
Kalshi is already planning to require some users to disclose their employers, getting ahead of the new compliance requirements.
Several states have pushed back hard, arguing that prediction markets circumvent local gambling laws. But the CFTC has blocked states from restricting platforms like Kalshi in a series of legal actions this year.
In plain terms = federal regulators and state governments are fighting over turf. The CFTC's position: this is our jurisdiction, and if we say it's open, it's open.
Content is for reference only, not financial advice.