CFTC Sends Advisory Note To Prediction Market Operators
Today, the Commodity Futures Trading Commission (CFTC) released a six-page advisory note for prediction market operators. The note raised several regulatory reminders that the Division of Market Oversight (DMO) staff felt operators needed to know.
The advisory note also serves as a sort of proof of concept that the CFTC holds exclusive regulatory jurisdiction over prediction markets. But will state gaming regulators agree?
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CFTC Regulatory Advisory To Prediction Markets
The six-page advisory note from the CFTC sets out three key regulatory reminders for prediction markets. Let's go through each point at a time.
Sports Event Contracts Are Swaps
The first advisory note feels like it didn't come from the DMO staff but rather from CFTC chair Michael Selig, as it lays out how the CFTC believes sports event contracts are swaps.
Per the note, "an event contract that is settled based on the outcome of a sporting event is an agreement providing for a payment dependent on a future occurrence", and is thus a swap per the Commodity Exchange Act (CEA). The CFTC is also clear to note that the definition of a swap is "deliberately broad".
Of course, state regulators will certainly push back on this definition. Days prior to this note, a federal judge in Ohio ruled that sports event contracts are not swaps. The judge was clear to rule that swaps relate to "currency exchange rates, the weather, or energy costs" and that it was "absurd" to define sports event contracts as swaps.
No-Go Event Contract Markets
Following the CFTC's argument that sports event contracts are swaps is a warning that event contracts that are "contrary to the public interest," like assassination, war, or terrorism, can be listed by an operator.
This, of course, is on the heels of Kalshi catching a lot of negative attention for a market that asked customers to predict when Ayatollah Ali Khamenei would be "out". CEO Tarek Mansour defended his company's position, stating the contract was clear to state that death did not resolve the market.
We stand by principle and law:
— Tarek Mansour (@mansourtarek_) March 6, 2026
1. Kalshi didn't deviate from its market rules. They were clear that death did not resolve the market to "Yes".
2. Kalshi's rules prevented a 'death market', where traders directly profit from death. This is a good thing (+ we're a US based… https://t.co/gXMeQECFLz
While Kalshi might be following the letter of the law, some operators, like Polymarket, still have markets asking customers to predict when Iran will strike Israel or when US forces will enter Iran.
No Market Manipulation
Within the note's second point on unacceptable, the CFTC lays out expectations for promoting the integrity of derivatives markets and for the enforcement and monitoring of trading activity.
The CFTC reminds operators that they have a responsibility to list markets that are not "readily susceptible to manipulation".
Self-Certification Explanation Required
The final section of the note lays out a new requirement for operators when self-certifying new products. These new submissions must come with an "explanation and analysis of the contract's compliance with applicable provisions".
This must also include showing:
- Methodology for permutations of the contract
- Identify how the contract will be settled and the data that will verify it
- Assessment of the reliability, objectivity, and manipulation resistance of settlement data
Previously, operators would simply file a self-certification of a new market with the CFTC with very little justification, and it was more of a formality than anything else.
The CFTC states that it is consulting with several professional sports leagues regarding "settlement integrity", but that operators should reach out to various leagues independently and with the CFTC itself when designing new contracts.
Your Move, State Regulators
Again, the main reason for these advisory notes is a shot at state regulators challenging the CFTC's jurisdiction over prediction markets. Selig was clear to say his Commission will defend its authority in the sphere, and this note serves as the line in the sand.
However, states have already effectively circumvented the arguments brought by the CFTC in relation to sports event contracts.
Again, recently, an Ohio judge ruled that the Commodity Exchange Act definition of a swap does not include sports event contracts and that these contracts are effectively gambling. That argument has also been made in Maryland and in Nevada.
The debate on exclusive jurisdiction over sports gambling or sports event contracts is far from over.
