CFTC Proposes New Rules for Event Contracts on Prediction Markets
CFTC proposed new rules to regulate event contracts on prediction markets.
Why it matters: Legal teams in financial services must prepare for changes affecting derivatives linked to event contracts. The rules aim to modernize oversight of prediction markets to safeguard market integrity.
- On June 10, 2026, CFTC issued a Notice of Proposed Rulemaking to amend Rule 40.11.
- The proposal introduces a three-step test assessing if an event contract is contrary to public interest.
- Event contracts tied to terrorism, assassination, war, gaming, or unlawful activities are barred from trading on CFTC-registered platforms.
- Public comments on the proposal are due by July 27, 2026.
On June 10, 2026, the Commodity Futures Trading Commission (CFTC) issued a Notice of Proposed Rulemaking to amend Rule 40.11, focusing on event contracts traded on prediction markets. This seeks to update the regulatory framework to match the rapid growth of these markets.
The proposed rule implements a three-step analysis to determine if an event contract is contrary to the public interest. First, it identifies whether the contract involves an excluded commodity. Second, it assesses if the contract pertains to enumerated activities like unlawful conduct, terrorism, assassination, war, or gaming. Third, it evaluates the public interest implications of the contract. Contracts involving prohibited activities are deemed contrary to public interest and will not be allowed on CFTC-registered platforms.
CFTC Chairman Michael S. Selig stated, "Event contracts allow businesses and individuals to hedge event-driven risks, enable investors to manage portfolio exposure, and provide the public with information about the outcome of future events." He further emphasized that this proposal "begins the process of new rulemaking grounded in a rational and coherent interpretation of the Commodity Exchange Act, while reassuring the American people that the CFTC will exercise its exclusive jurisdiction over prediction markets."
With over $25 billion in trading volume across CFTC-designated markets in 2025, these changes are timely for ensuring market integrity. The CFTC is currently seeking public input, with comments due by July 27, 2026. Legal teams at financial institutions and trading firms should review the proposal closely to prepare for compliance requirements and potential impacts on their event contract offerings.
By the numbers:
- $25 billion — total trading volume across CFTC-designated contract markets in 2025
- July 27, 2026 — deadline for public comments on proposed rule
What's next: The CFTC will review public comments after July 27, 2026, before finalizing the rule.