The Commodity Futures Trading Commission released a proposed rulemaking on June 10, 2026, that aims to reshape how event contracts and prediction markets are regulated in the United States. The proposal, which amends CFTC Regulation 40.11, seeks to clarify exactly which types of such contracts can be blocked as contrary to the public interest under the Commodity Exchange Act’s “Special Rule.” The agency laid out a three-step process for evaluating them. First, regulators assess whether the contract is based on an occurrence or contingency. Second, they determine if it involves one of the prohibited activities: unlawful activity, terrorism, assassination, war, or gaming. Third, the CFTC must complete a public interest analysis before banning any contract.
The proposed rules try to bring some order to what has been a chaotic area of financial regulation. Prediction markets have exploded in size, with total trading volume across CFTC-registered platforms exceeding $25 billion in 2025. Event contract listings jumped from roughly 1,600 per day in April 2025 to 162,000 per day in April 2026.
Defining “involves” and “gaming”
The amendments introduce two definitions that do most of the heavy lifting. The first clarifies when an event contract “involves” a banned activity. Under the proposed standard, the Commission looks at whether settlement depends on the activity itself, not on the act of trading or an incidental connection. A contract on whether a football player scores a certain number of touchdowns involves gaming because settlement turns on something that happens during the game. A contract on game attendance would not, since settlement depends on ticket-purchasing decisions made outside the game. They offered an unusual example of how this works in practice. A contract that settles based on whether a foreign leader is out of office by a certain date would, in the agency’s view, involve assassination if that remains “among the pathways by which the settlement condition can be satisfied.” The contract would not involve assassination if it limited settlement pathways to electoral defeat, resignation, constitutional removal, natural death, or a negotiated departure.
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The second key definition tackles “gaming” head-on. The Commission proposes to define gaming as an activity that participants engage in for recreation, is governed by rules, and includes measurable outcomes that depend on luck, skill, or athletic ability. This deliberately distinguishes gaming from gambling. They treat gaming as the underlying game itself, not the act of wagering on its outcome — a distinction the agency said is necessary to keep the Special Rule from swallowing every event contract. The proposal also makes clear that elections, awards, and similar contests do not become gaming just because people bet on them. The Commission is asking for public comment on tougher edge cases, including game shows, reality competitions, pageants, and music competitions that mix rules, judging, and audience appeal.
What the CFTC is likely to ban
The proposal establishes a multi-factor public interest analysis that weighs several considerations. No single factor decides the outcome, and they organize them into two tiers: general factors that apply to all event contracts, and factors specific to particular banned activities. The general factors include whether the contract provides meaningful hedging or price-basing utility, whether it yields economically useful information, and whether it promotes responsible innovation. The Commission stressed that prediction markets function as “information aggregation vehicles” and that contracts don’t need a direct hedging purpose to pass muster.
Some categories are almost certainly doomed. The Commission stated that all contracts involving terrorism, assassination, and war are “highly likely” to be found contrary to the public interest. Contracts based entirely on random chance are also in that category, since participants have no useful information to contribute when outcomes are pure luck. Activity that is unlawful under federal law is also highly likely to be blocked. Certain sports-related contracts are “likely” to be found contrary to the public interest. Player injury contracts could create financial incentives to cause physical harm. Officiating-only contracts present manipulation risks. “First-action” contracts tied to a single player’s decision let one person determine the settlement. Pre-collegiate sports contracts raise concerns about manipulating minors. By contrast, the agency views contracts based on aggregate outcomes of professional or collegiate sports — final scores, point differentials, win-loss results, tournament advancement — as “unlikely to be found contrary to the public interest,” assuming objective settlement criteria and proper surveillance.
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How the review process would work
The proposed amendments create a defined timeline for contract review. The Commission can begin review only through a written determination that a contract involves an Enumerated Activity and may be contrary to the public interest. That review must start within 10 days of listing. Once review begins, the DMO Director must provide the registered entity with a written statement of concerns within 15 days. The entity can submit a response within 30 days, including supporting data and proposed safeguards. They must make a final determination within 90 days unless the entity agrees to an extension. If the Commission doesn’t issue an order by then, or if 100 days pass since listing, the review ends and the contract can continue trading.
There’s a real risk embedded in this timeline. Trading may continue during the review period. If they later find the contract contrary to the public interest, market participants would likely have to liquidate positions, losing hedges or unrealized gains. The Commission “encourages” entities to consult with staff before self-certifying potentially problematic contracts — but there’s no requirement to do so.
Federal preemption and the jurisdictional fight
The proposed rule lands directly in the middle of an ongoing jurisdictional battle and comes down firmly on the side of federal authority. They invoke their “exclusive jurisdiction” under the Commodity Exchange Act and state that federal law preempts state attempts to regulate transactions on CFTC-registered exchanges. This position leaves little room for state gaming authorities to assert control over event contracts traded on designated contract markets. The definition of gaming matters here. Because the CFTC separates playing a game from wagering on its outcome, contracts that settle on sports results do not “involve” gaming merely because they resemble sports bets. That undercuts the central argument of state-licensed sportsbooks that prediction markets offer functionally identical products outside state licensing and tax regimes. The Commission acknowledges the Indian Gaming Regulatory Act and tribal gaming interests but maintains that event contracts traded as swaps or futures fall within its exclusive jurisdiction.
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What the proposal leaves unresolved
Several issues remain open for future rulemaking. The proposal didn’t identify any new activity as “similar” to the banned activities, though it preserved the agency’s authority to add categories later. They also asked whether it should create broader category-level determinations for entire classes of event contracts, rather than reviewing each contract individually. Entertainment and technology questions went unanswered. The Commission asked whether game shows, reality competitions, and pageants should count as gaming. It also asked about monitoring data provenance, automated quoting, AI-generated content, and deepfakes — but offered no conclusions.
Comments on the proposed rulemaking are due by July 27, 2026. The agency requested input on all aspects of the proposal, including the “involves” standard, the gaming definition, the public interest factors, and the costs and benefits of the approach.
