Prediction markets are booming — from sports bets to contracts tied to geopolitical events. But would your exchange actually be allowed to list them in the U.S.?
The Commodity Futures Trading Commission has just released new guidance for platforms launching event contracts. So we turned the regulator’s advisory into a quick test.
Below is a simplified checklist based on the regulator’s latest advisory.
1. Are You Operating a Regulated Exchange?
If your platform operates as a Designated Contract Market (DCM) or plans to apply for such designation, the CFTC framework for derivatives exchanges will apply directly to the listing of prediction markets.
Platforms operating offshore or outside the U.S. regulatory framework may face different legal and compliance considerations.
Answer
☐ Yes — continue to the checklist
☐ No — U.S. listing may not be possible under the current framework
2. Could the Contract Be Easily Manipulated?
Under U.S. derivatives rules, exchanges are expected to list only contracts that are not readily susceptible to manipulation.
Sports markets have already raised concerns among regulators. Contracts tied to individual incidents — such as player injuries or referee decisions — may be easier to manipulate because their outcome can be influenced by a small number of participants.
Answer
☐ Yes
☐ No
3. Do You Have Market Surveillance Systems in Place?
Regulated exchanges are expected to monitor trading activity in real time and investigate irregular market behavior. This includes detecting disorderly trading, identifying anomalies in market activity, and accessing trader-level data if an investigation is required.
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As institutional trading firms and prime brokers explore ways to connect clients to prediction markets, regulators are placing greater emphasis on market surveillance and the detection of unusual trading patterns.
Answer
☐ Yes
☐ No
4. Is the Settlement Data Reliable and Transparent?
Event contracts typically settle based on external data sources. Exchanges are expected to clearly define how the settlement outcome is calculated and where the underlying data comes from.
Regulators emphasize the importance of accurate, reliable, and manipulation-resistant data sources, as well as safeguards that prevent premature disclosure of key data used in settlement calculations.
Answer
☐ Yes
☐ No
5. Have You Engaged With Relevant Authorities or Sports Leagues?
For sports-related event contracts, regulators encourage exchanges to coordinate with relevant sports leagues or governing bodies.
This may include consulting integrity units, establishing data-sharing arrangements, and ensuring that contract design aligns with the integrity standards of the relevant league.
Answer
☐ Yes
☐ No
6. Does the Contract Involve Sensitive or Restricted Events?
U.S. law allows regulators to prohibit event contracts that are deemed contrary to the public interest. This may include contracts tied to events involving assassination, war, or terrorism.
Earlier this month, markets speculating on the potential removal or death of Iran’s Supreme Leader Ayatollah Ali Khamenei sparked controversy and renewed debate about whether certain geopolitical contracts should be allowed.
Answer
☐ Yes
☐ No
Quick Interpretation
If your answers mostly “Yes”, your platform may be structurally prepared to list prediction markets under the current regulatory framework. Several “No” answers might mean that your contracts could face regulatory scrutiny or delays.
How might these rules apply in practice?
The examples below show how different types of prediction market contracts might be viewed under the CFTC framework.
Contract Type | Example |
|---|---|
Economic data | CPI inflation above 3% |
Monetary policy | Fed rate decision |
Politics | U.S. presidential election |
Sports | Super Bowl winner |
Individual events | Player injury |
Geopolitics | Leadership change |
The CFTC has also encouraged exchanges to engage with regulators early in the contract design process, particularly for markets that may carry higher manipulation risks.
The guidance does not ban prediction markets. But it signals that exchanges launching event contracts will be expected to meet the same standards of market integrity as traditional derivatives venues — a test some contracts may struggle to pass.
