CFTC Proposes Framework for Review of Prediction Market Event Contracts

On June 10, 2026, the CFTC issued a notice of proposed rulemaking that would overhaul how it evaluates whether to prohibit the listing or clearing of an otherwise compliant contract by a CFTC-registered entity based on a finding that it involves a prohibited "enumerated activity" and is contrary to the public interest.

Section 5(c)(5)(C) of the Commodity Exchange Act contains a "Special Rule" governing the review and approval of event contracts. Thereunder, the CFTC evaluates an event contract under a three-step framework focused on whether: (i) an "event contract"; (ii) "involves" an "enumerated activity" (activity that is unlawful under any federal or state law, terrorism, assassination, war, gaming, or similar activity); and (iii) is contrary to the public interest. The proposed rule clarifies and codifies the Commission's decision-making process at each step. It further provides for a 90-day review window that the CFTC can initiate no later than 10 days after listing. A contract may remain listed during and after this review unless the Commission issues an order with written findings that the contract is against the public interest, supported by a factor-by-factor analysis.

Most notable are the proposed rule's treatment of steps two and three. At step two, the proposed rule limits the universe of affected contracts by creating a settlement-focused approach to determining whether a contract "involves" an enumerated activity. This approach meaningfully narrows the Special Rule's scope by permitting event contracts affected by, but not directly involving, enumerated activities. Thus, a contract that settles based on whether the United States and Iran go to war "involves" war (an enumerated activity); one that settles based on the volume of oil flowing through the Strait of Hormuz does not, even though such a contract is heavily impacted by war. The proposed rule further specifies that contracts based on economic/financial indicators, currency rates, award contests, and political election results are generally outside the Special Rule's scope as they do not "involve" enumerated activities.

The proposed rule gives particular attention to contracts that "involve" the enumerated activity of "gaming." It defines "gaming" to include any activity that participants typically engage in for recreation or to entertain others that is governed by rules and that has measurable occurrences depending on luck, skill, or athletic ability. It also recognizes that this definition means that many sports-driven event contracts will "involve" an enumerated activity—subjecting them to public interest scrutiny. The proposed rule specifies, however, that political elections are contests that do not fall under "gaming."

At step three, the proposed rule lays out new factors that the CFTC will apply to determine whether a contract that involves an enumerated activity is consistent with the public interest. These include: (i) price discovery utility; (ii) use of the information in economic decisions, such as hedging; (iii) information aggregation; (iv) promotion of innovation and fair competition; (v) potential market integrity threats; (vi) likelihood of settlement integrity; and (vii) likelihood of information leakage and misuse of confidential information. The proposed rule also describes public interest factors specific to enumerated activities (e.g., the Commission will consider whether a contract incentivizes violence as it relates to assassination).

Here, too, the proposed rule gives particular attention to gaming. In assessing whether gaming contracts are consistent with the public interest, the Commission will evaluate whether the contract depends on pure chance. If not, it will look favorably on contracts where there is objective and verifiable settlement data, an established sport-level integrity mechanism, and relevant sports leagues and governing bodies coordinating information. Conversely, the CFTC will look unfavorably on contracts that settle based on player injuries, altercations, or officiating decisions. The proposed rule also delineates between participant-level contracts that settle based on statistics that accrue over the course of a game (e.g., total player points) and those that settle based on discrete actions (e.g., specific pitchers throwing specific pitches). The proposed rule favors the former and disfavors the latter. It also appears to leave the door open to certain prop bets that inform price discovery while excluding those that do not.

Overall, the proposed rule offers insight into the types of event contracts that will generally survive regulatory scrutiny. Contracts are more likely to survive if they serve price discovery and information aggregation utility, settle on objective and verifiable criteria, and can be administered within existing compliance regimes. As for sports-related contracts, the Commission is claiming discretionary authority to review contracts for public interest, but it is likely to allow contracts that settle based on aggregate outcomes with verified data and integrity frameworks.