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On June 10, 2026, the U.S. Commodity Futures Trading Commission (CFTC) published a Notice of Proposed Rulemaking (NPRM) seeking public comment on amendments to CFTC Regulation 40.11 and the addition of a new Appendix F to part 40, addressing event contracts, commonly traded on so-called “prediction markets.” The proposal would specify which event contracts may be subject to a determination that they are contrary to the public interest, set out the factors the Commission would apply, and add a definition of “gaming” together with a rule for when an event contract “involves” an underlying activity.

The proposal arrives as the prediction markets industry has shot to the forefront of politics and sports betting, with total trading volume across CFTC-registered prediction markets exceeding $25 billion in 2025. The new NPRM is narrowly tailored to one aspect of an Advance Notice of Proposed Rulemaking (ANPRM) the Commission published in March 2026, and the Commission has signaled that the broader ANPRM may lead to further rulemaking.

Statutory backdrop: the “Special Rule”

Under Section 5c(c)(5)(C) of the Commodity Exchange Act, the so-called “Special Rule” added by the Dodd-Frank Act in 2010, the CFTC may determine that certain event contracts are contrary to the public interest where they involve activity unlawful under any Federal or State law:

  • terrorism,
  • assassination,
  • war,
  • gaming,
  • or other similar activity identified by the Commission by rule.

A contract found contrary to the public interest may not be listed or made available for clearing or trading on any registered entity.

The CFTC reads the Special Rule to require a three-step inquiry before a contract may be prohibited: first, whether the instrument is an event contract; second, whether it “involves” an enumerated activity (or a similar activity identified by Commission rule); and third, if so, whether the contract is affirmatively contrary to the public interest. The Special Rule does not make event contracts involving an enumerated activity contrary to the public interest per se; rather, the Commission “may” so determine on a contract-by-contract basis.

What it means for a contract to “involve” an enumerated activity

A central interpretive change in the proposal is the meaning of “involve.” The Commission proposes to read the term as referring to the underlying event being offered and traded, not the act of trading the contract itself, an interpretation it views as consistent with the U.S. District Court for the District of Columbia’s reading of the Special Rule. On that basis, the Commission preliminarily believes the 2012 Nadex Order misapplied the rule by focusing on the nature of the trading rather than the nature of the underlying event.

The Commission illustrates the change with examples: a contract settling on whether an individual will commit murder involves unlawful activity under state law because the settlement-determining occurrence is itself unlawful, while a contract settling on whether a defendant is convicted by a date certain does not, because settlement turns on a lawful judicial act. For “facially neutral” contracts that could settle through multiple causal pathways, at least one of which falls within terrorism, war, or assassination, the Commission would treat the contract as involving the enumerated activity unless the contract terms specify settlement pathways with sufficient detail to exclude that pathway.

A new definition of “gaming”

The proposal would adopt a specific definition of “gaming” tied to the ordinary meaning of “game,” encompassing sports games, athletic competitions, and recreational games, including games of chance, rather than relying on a multifactor approach or a list of examples. Importantly, the Commission would not treat an activity as “gaming” merely because gambling occurs in connection with it. An event contract on who will win the Nobel Prize, for example, would fall outside the Special Rule under the proposed definition because the Nobel Prize contest is not itself a game. The Commission also draws a line between events occurring in a game and events occurring around it: a contract on whether a football player scores a certain number of touchdowns involves gaming, while a contract on attendance at the same football game does not.

Sports event contracts: where the Commission draws the line

The proposal’s treatment of sports has drawn the most public attention, and signals that prediction markets based on sports scores, price spreads, win-loss results, tournament advancement, and similar data may serve price discovery functions and provide meaningful information. Where sports event contracts settle on outcomes generated over an extended period of play and rely on publicly reported, league-verified, or otherwise objectively determinable data, the Commission preliminarily views those features as weighing heavily against a finding that the contract is contrary to the public interest.

Conversely, contracts that settle solely by reference to officiating decisions or to a discrete action by an identified participant raise distinct integrity concerns, and the Commission preliminarily believes such contracts would be likely to be found contrary to the public interest. More specifically, the Commission identifies five categories of sports event contracts likely to be found contrary to the public interest: player-injury contracts; officiating-outcome contracts; discrete-action contracts tied to a specific play, pitch, shot, foul, or penalty by an identified participant; physical-altercation contracts (with a carve-out for combat sports such as MMA and boxing, where physical contact is a sanctioned element of the sport); and contracts on pre-collegiate sports events.

A multifactor public interest test

Rather than a single static test, the Commission proposes a multifactor framework in which no single factor is dispositive and the weight given to each factor varies with the contract and enumerated activity at issue. The proposal organizes the analysis into factors that apply to all enumerated activities and additional factors specific to each:

  • Hedging and price-basing utility. Whether the contract provides meaningful hedging or price-basing utility consistent with CEA Section 3 and yields useful information.
  • Effect of prohibition on transparency. The Commission also proposes to weigh whether prohibition would simply push activity into less transparent or less regulated foreign venues, diminishing CFTC oversight, a factor that would weigh against finding a contract contrary to the public interest.
  • Susceptibility to manipulation or market disruption, consistent with the CEA’s purpose of deterring price manipulation and disruptions to market integrity.
  • Specific concerns for terrorism, assassination, and war contracts, including the risk that wrong-doers could trade to create misleading signals and divert law-enforcement attention, settlement ambiguity arising from the “fog of war,” and information leakage concerns where individuals with access to sensitive national-security information could exploit that information.

The Commission also offers an illustrative, non-exhaustive list of event contracts that would generally fall outside the Special Rule, including contracts on the CPI and other price indices, the U.S. trade deficit with another country, measures related to GDP, jobless claims, or the unemployment rate, and U.S. new home sales.

Process: a 90-day review and group orders

The proposal preserves the statutory 90-day review window for public interest determinations and addresses the practical reality that contracts may be self-certified and begin trading before review is complete. Proposed § 40.11(e)(1)(i) would allow the Commission to issue a single order finding that a group of similar event contracts is contrary to the public interest, which the Commission believes will promote predictability and avoid duplicative determinations. However, the Commission preliminarily concluded that the Special Rule does not authorize categorical determinations applying prospectively to classes of contracts that have not yet been certified.

The Commission also signaled what it expects from prediction markets: where a contract potentially involves an Enumerated Activity, a mere general statement of the type of contracts to be listed will not satisfy the existing Rule 40.2(a)(3)(v) requirement to explain compliance with the CEA, and staff are likely to request additional information.

Context: a contested regulatory landscape

The proposal lands in the middle of an unresolved jurisdictional dispute. In May, Minnesota became the first state to ban prediction market sites outright, and other states have sought to regulate prediction markets as gambling, prompting the CFTC to sue Arizona, Connecticut, Illinois, and New York for what it characterizes as intrusion on its exclusive jurisdiction. Around the time the proposal reached OMB for review, the President posted that it was “critically important” that the agency’s exclusive authority be maintained. In parallel, the SEC has delayed 24 prediction market ETFs filed by Roundhill, Bitwise, and GraniteShares tied to elections and economic data, with Chairman Paul Atkins flagging concerns about overlapping jurisdiction with the CFTC and the risk of manipulation in the underlying markets.

State and tribal opposition is substantial: the American Gaming Association characterized the proposal as “a remarkable attempt to redefine what constitutes sports betting” and asserted that prediction markets are illegally siphoning tax revenue from state and tribal governments.

What this means for you

For market participants and prospective DCM applicants, the proposal, if adopted in current form, would substantially clarify the analytical framework that has been a moving target. CFTC Chairman Michael S. Selig framed the goal as protecting market integrity “without standing in the way of responsible innovation,” and described the proposal as offering “a durable, transparent framework to identify the contracts Congress directed us to scrutinize while letting legitimate markets move forward.”

Key takeaways for stakeholders:

  • Sports contracts are not categorically off the table, but design choices matter. Objective, league-verified settlement data and outcomes derived from extended play are likely to fare better than discrete-action or officiating-driven contracts.
  • “Gaming” is narrower than “gambling.” Whether an underlying activity itself is a game, not whether bets are placed in connection with it, drives the Special Rule analysis.
  • Submission discipline will increase. Generalized contract specifications are unlikely to clear staff review where any enumerated activity is implicated; prediction markets should expect requests for substantive analysis under the proposed factors.
  • State litigation risk persists. The proposed federal framework does not resolve pending state and tribal challenges, and stakeholders should continue to monitor developments in the Third Circuit, the Ninth Circuit, and at the state level.

Comments on the proposal are due 45 days after publication in the Federal Register.

Contact us

If you have questions about how the CFTC’s prediction-markets proposal affects your business or product roadmap, please contact Jeff Le Riche, Kip Randall, or Matti Mortimore.