The U.S. Commodity Futures Trading Commission (CFTC) has released a draft of proposed rules for prediction markets that signals a more permissive stance toward sports-related contracts. The proposal distinguishes between types of event-based contracts, indicating that markets settled on aggregate outcomes such as final scores, win-loss records or season statistics can promote price discovery and generally are not contrary to the public interest — even though federal law has historically classified many such markets as forms of “gaming.”
At the same time, the draft draws a line around contracts that could encourage manipulation. Instruments tied to individual player injuries, specific officiating decisions or other outcomes vulnerable to influence are identified as unlikely to meet the public interest test and therefore would be disfavored.
The proposal also explicitly states that election contracts are not considered “gaming” under the relevant statutes, a clarification that could reduce regulatory uncertainty for platforms that offer political markets. The draft was released for public comment for a 45-day period, and the final rules could shape how U.S. prediction markets operate and are supervised going forward.
Legal observers note the framework is principles-based rather than an across-the-board approval. Gary Kalbaugh, a partner at Cahill Gordon & Reindel LLP, summarized the approach by saying that while gaming is defined broadly and can sweep in sports events, contracts that settle on aggregate outcomes are presumptively permissible — each contract, however, will still be evaluated on a case-by-case public interest basis.
The proposal arrives as prediction markets continue to accelerate in visibility and capital. The draft describes prediction markets as an emerging “asset class,” and several leading platforms have attained multibillion-dollar valuations amid rising retail and institutional interest. These markets expanded sharply around the 2024 U.S. presidential election, when traders increasingly used them to gauge political outcomes.
Market participants have also been building links to traditional financial infrastructure. One major platform recently partnered with a global exchange to launch prediction markets that let users forecast private-company valuations ahead of IPOs. Another has moved to integrate real-time market data into established news brands, increasing the reach and perceived legitimacy of prediction prices.
Academics and analysts see this mainstreaming driving demand for clearer rules. Melinda Roth, a sports law and corporate finance professor, observed that as prediction markets grow and form partnerships with media and financial firms, the unresolved question becomes whether event contracts should be treated as financial instruments or as gambling. Analysts at investment firms such as Bernstein report growing institutional adoption, with some investors using binary-outcome contracts for macro hedging and alternative risk management.
If finalized, the CFTC’s rules would offer a regulatory framework that permits many sports and election-based contracts while excluding markets where settlement terms create manipulation risks. The agency’s approach aims to balance innovation in new market structures with protections against conflicts of interest and market abuse.
The draft is open for public comment for 45 days. Stakeholders — including platforms, market participants and public-interest groups — are expected to weigh in as the CFTC refines its standards and decides how broadly to permit different types of event-based contracts.