After two years of enforcement actions, state bans, and competing jurisdictional claims, the CFTC has submitted its event contracts proposal to the White House Office of Management and Budget, formally initiating the federal rulemaking process.
The details of the proposal have not been published. But the CFTC's direction has been clear for some time.
Chairman Michael Selig said in January that the agency intended to develop formal rules for prediction markets, after withdrawing an earlier proposal that would have restricted political and sports event contracts.
In April, Enforcement Director David Miller publicly stated that insider trading rules apply to prediction markets as "event contracts are not gaming", and should be treated as swaps under federal law.
Compliance Expectations Are Already Taking Shape
That distinction has practical consequences for brokers, exchanges, and fintech firms. If event contracts are derivatives, the full compliance stack applies: KYC, trade surveillance, insider trading controls.
Platforms are already starting to apply those standards in practice. Kalshi suspended and fined three U.S. political candidates for betting on their own races, citing the move as evidence that regulated prediction markets can enforce insider trading rules as traditional financial venues do.
The CFTC recently charged a Google employee who allegedly used non-public company information to trade on Polymarket. Congress separately demanded KYC and trade-surveillance records from both Kalshi and Polymarket following investigations into trades tied to geopolitical events.
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The Federal-State Fight Is Escalating
The rulemaking process runs in parallel with an unresolved fight over who actually has authority here. Minnesota, New York, Illinois, Arizona, and Connecticut have each argued that prediction markets are gambling products subject to state betting law.
The CFTC's position is the opposite: these are event contracts under federal commodities law, regulated as swaps, and states don't have jurisdiction.
The White House has backed the federal position. Trump described prediction markets as a "major industry" and argued that fragmented state regulation would undermine U.S. competitiveness in digital finance.
For financial firms exploring the sector, the outcome will determine whether event contracts can scale under one federal framework or remain subject to state-level gambling regulation.
