On June 10, the CFTC (by the vote of its sole Commissioner) issued a notice of proposed rulemaking that would establish a framework for determining when event contracts involving gaming, war, terrorism, assassination, or unlawful activity are contrary to the public interest under the Commodity Exchange Act (CEA).The proposal would amend Part 40 of the CFTC's regulations and provide guidance regarding the Commission's review of prediction market contracts under CEA Section 5c(c)(5)(C) — the so-called "Special Rule." The rulemaking comes as prediction markets have grown substantially, with total trading volume across CFTC-registered prediction markets exceeding $25 billion in 2025, and follows the 2024 federal court decision which vacated the Commission's prior disapproval of congressional control event contracts.
The proposal follows the Commission's withdrawal of a 2024 proposed rule and the issuance of a 2026 Advance Notice of Proposed Rulemaking (ANPRM) that drew approximately 3,500 public comments. Specifically, the proposal would:
- Define when a contract “involves” an enumerated activity. A contract would meet that standard only when its settlement is determined by an occurrence, extent of an occurrence, or contingency in the enumerated activity itself — not merely because trading in the contract resembles or relates to such an activity. This represents a significant departure from the approach taken in a 2012 Order and 2023 Order, both of which the Commission now preliminarily acknowledges were incorrect.
- Define “gaming” for Regulation 40.11. Covered activities would generally include rule-based recreational or entertainment activities whose outcomes depend on luck, skill, or athletic ability during the activity. Notably, political elections, award contests (such as the Nobel Prize or Academy Awards), and other evaluative processes are expressly excluded as "contests" rather than gaming — meaning event contracts on those topics would generally fall outside the Special Rule's scope.
- Set public-interest factors. The Commission would consider price discovery, information aggregation, market integrity, manipulation risk, and compliance challenges.
- Distinguish sports contracts from other gaming-related contracts. Many sports event contracts may not be contrary to the public interest, while contracts involving random chance, injuries, officiating, or youth sports may raise greater concerns.
Putting It Into Practice: The proposal represents the CFTC's most comprehensive attempt to operationalize the Special Rule since its adoption in 2011, and it makes several consequential interpretive choices. First, by narrowing the "involves" standard to focus on the settlement-determining occurrence rather than the character of trading activity, the Commission effectively overrules the reasoning of both the 2012 Order and the 2024 Order — a significant acknowledgment that prior enforcement actions rested on flawed statutory interpretation. Second, the definition of "gaming" as an activity-based concept (rather than a wagering-based one) has the practical effect of placing political event contracts, award contests, and similar products outside the Special Rule's reach, providing meaningful certainty for exchanges that have listed such contracts. Third, the deemed-concluded default — under which a contract may trade if the Commission does not act within 90 days — shifts the procedural posture in favor of listing, though the Commission retains broad discretion to initiate review within 10 days of listing. Participants involved in prediction markets should note that the proposal does not create safe harbors: sports contracts remain subject to factor-by-factor analysis, and the Commission expressly reserves authority to prohibit contracts it finds contrary to the public interest on a case-by-case basis. Comments are due 45 days after Federal Register publication.