Prediction markets in the U.S. may soon get their first official set of rules. On June 10, the CFTC put forward a proposal for discussion concerning event contracts and where the line is drawn between a permissible market and prohibited betting.
The issue has become especially sensitive following statements by Donald Trump. The White House supports the idea that the CFTC should be the one to oversee this area. However, authorities in several states hold a different view and continue to treat such platforms under gambling laws.
Commission Chair Michael Selig called the document an attempt to bring order to a matter that has long sparked disputes among regulators, platforms, and politicians.
“The proposal offers a sustainable and transparent system for identifying contracts that Congress has tasked us to carefully review, while not creating obstacles for legitimate markets to operate,” he said.
Which Markets Could Be Banned
The commission did not publish a long list of permitted and prohibited contracts. Instead, it proposes evaluating each case individually.
Special attention will be paid to events related to terrorism, military conflicts, assassinations, gambling, and other illegal activities.
When considering a contract, the regulator plans to take several factors into account. The event itself, its connection to prohibited categories, and potential consequences for the market all matter.
The practical side of the issue will also be assessed separately. For example, does such a contract help participants hedge risks and obtain market benchmarks, or does it create opportunities for abuse?
After the final version of the document is published, the CFTC will open a public comment period for 45 days. After that, the countdown to the new rules taking effect will begin.
See Also: Pyth Introduces New Indexes With 24/7 Tracking of Stock and Commodity Prices
The proposal also provides a telling example. A contract on oil shipments through the Strait of Hormuz is not automatically classified as a market related to war or terrorism. According to the commission, this is primarily about commercial activity and logistics, not the conflict itself.
What Authorities Are Saying
The new rules come amid a dispute between the federal regulator and state authorities. Since April 2026, the CFTC has been in litigation with Arizona, Connecticut, Illinois, New York, and Wisconsin. The commission is trying to prevent them from shutting down prediction markets using local gambling laws.
The situation escalated after a decision by Minnesota. The state was the first to directly criminalize such platforms. Governor Tim Walz approved criminal penalties for prediction market operators.
Meanwhile, 39 attorneys general led by Aaron Ford of Nevada and Dave Yost of Ohio supported Massachusetts in a dispute against Kalshi over sports contracts.
Prosecutors believe such platforms effectively operate as unregulated gambling services. According to their data, from January to June 2025, users placed more than 3.4 million bets on sporting events totaling over $1 billion. About 90% of this volume was tied specifically to match outcomes.
On May 27, Trump wrote on Truth Social that certain officials are blocking federal oversight of prediction markets. Among them, he named Chris Christie, Letitia James, Tim Walz, and J. B. Pritzker.
“Other countries are already competing for this new form of financial market, and we want to stay on top,” Trump wrote.
Why the New Proposal Is Sparking Debate
The CFTC proposal quickly became a source of controversy. Some believe the regulator is finally trying to set rules for a market that is growing too quickly. Others see it as a struggle for control and political pressure on the states.
Senator Elizabeth Warren has already sent an official request to the CFTC . She demanded internal documents, correspondence with industry companies, and information on staffing changes at the agency.
Warren noted staff cuts at the commission and a decline in enforcement actions. Since January 2025, the CFTC staff has shrunk by about 25%, and the number of such cases dropped from 58 in fiscal year 2024 to 11 under the current administration.
A separate issue involves a potential conflict of interest. Warren pointed to financial ties between the Trump family and companies that could fall under CFTC oversight.
Citing a New York Times investigation, several such connections are listed. These include a partnership between Trump Media and Crypto.com, investments by Donald Trump Jr.’s company 1789 Capital in Polymarket, and support for American Bitcoin Corp from the Winklevoss brothers. This company was previously co-founded by Eric Trump.
See Also: Trump Threatens New Strikes on Iran, but Oil Is Already 25% Below Crisis Peak
Insider trading on prediction markets is also raising questions. According to Reuters, several high-profile cases involving such platforms have emerged in recent months.
These include a U.S. special forces servicemember who bet on the arrest of Nicolás Maduro, George Santos, who wagered on his own attendance at the president’s address to Congress, and a Google engineer accused of using confidential data on search trends.
Kalshi has already tightened oversight. The platform now requires traders to disclose their place of employment when participating in sensitive markets. In the first quarter of 2026, the company also sent regulators more than 20 internal reports of suspicious activity.
Despite all the controversy, the market continues to grow rapidly. According to DefiLlama, monthly trading volume on prediction markets increased from $30.63 million in January 2025 to nearly $479.5 billion in January 2026.
The total value locked in prediction market protocols this week approached $500 million. Most activity remains concentrated on Kalshi and Polymarket.
