CFTC No-Action Letter Eases Reporting Rules for Prediction-Market Event Contracts

Prediction markets let traders take positions on outcomes ranging from sports contests to elections. Their rapid expansion has put the Commodity Futures Trading Commission at the center of a jurisdictional fight over whether event contracts are federally regulated derivatives or gambling subject to state oversight. For CFTC-regulated designated contract markets, self-certification can speed listings, but exchanges must still show that each product complies with the Commodity Exchange Act, settlement rules and core principles.

The CFTC’s Division of Market Oversight issued its latest advisory on July 24, warning platforms including Kalshi, Coinbase, Polymarket and Crypto.com against broad, template-style filings that combine many contract permutations. Each proposed variation must include its terms, underlying commodity, settlement methodology, data sources and compliance analysis under Regulation 40.2, the agency said. The notice was the regulator’s second warning in several months, following guidance on March 12, though closely related contracts may still be certified as a class.

Prediction markets allow participants to trade event contracts tied to outcomes such as elections and economic data, but sensitive subjects including war and gambling have long occupied a gray area between derivatives oversight and gambling laws. Uniform review standards from the U.S. Commodity Futures Trading Commission could affect the compliant operation of Polymarket and Kalshi in the United States.

The CFTC issued a staff advisory on prediction markets on June 10 and formally opened a rulemaking and public comment process. Event contracts involving war, gambling and other sensitive categories will be reviewed case by case. Chairman Mike Selig said the era of operating without clear rules was over, as the agency shifts its policy focus from litigation to rules established in advance. The document did not address trading amounts or penalties.