The long – awaited public comment period of the Commodity Futures Trading Commission on prediction markets has finally arrived. On Thursday, the CFTC officially launched the next stage of its revamp of prediction markets by publishing an Advanced Notice of Proposed Rulemaking.
The commission is inviting the public to share their opinions on how event contracts should be regulated and what boundaries should be set for those markets, including which contracts should be banned as “contrary to public interest.”
The publication of this notice comes after Chairman Michael Selig announced in January that the CFTC would change its approach to prediction markets, and the agency formally withdrew both its 2024 event contracts proposal and its 2025 staff advisory on sports event contracts on February 4.
When the CFTC opened the comment period, Selig stated, “Today’s action is an important step in the Commission’s ongoing efforts to promote responsible innovation in our derivatives markets. This initiates the process of new rule – making based on a rational and consistent interpretation of the Commodity Exchange Act, while reassuring the American people that the CFTC will exercise its exclusive jurisdiction over prediction markets.”
The public has 45 days from the date of publication in the Federal Register to submit written comments via the CFTC Comments Portal.
A 32 – Page Notice Filled With Big Questions
The notice is a lengthy read, filled with page after page of questions that cover a wide range, from how statutory core principles apply to prediction markets and the vulnerability of event contracts to manipulation, to whether the Commission should permit margin trading for retail customers, and how to define the public – interest implications of activities such as war, terrorism, and gaming.
The notice specifically asks the public to assist the CFTC in defining the scope of terms like “war” and “gaming,” and whether sports competitions should be treated differently from other contests.
In the section titled “Activities Listed in CEA Section 5c(c)(5)(C),” the Commission requests comments on some of the most controversial topics in prediction markets, including terrorism, assassination, war, and gaming.
Under the war subsection, the CFTC poses the following questions:
- Does this activity cover all military actions, or are there military actions that do not amount to war?
- What factors distinguish war from, for example, civil unrest? What factors distinguish war from political actions or other actions as part of international relations?
- Are specific definitions in other contexts, such as insurance, useful?
- What public – interest factors should the Commission consider for event contracts involving war?
The notice also raises questions about responsible gaming standards, including self – exclusion, time and spending limits, advertising restrictions, and warnings.
Another major theme in the notice is insider trading, a topic that has drawn significant attention on Capitol Hill and from the public in recent months after several unusually well – timed trades related to U.S. military action in Venezuela and Iran led to suspected insiders making thousands of dollars in profits.
The CFTC asks whether there is any public interest in allowing people with an “asymmetric information advantage” to trade on a specific contract, while recognizing the risks of unfairness, misuse of non – public information, and cross – market manipulation.
It also inquires about the impact of non – public information available to federal government employees or officials on prediction markets and how the potential application of existing law should guide the Commission’s regulation of those markets.
In the final section, the notice turns to fundamental classification questions, including whether event contracts should be treated as swaps, futures, or something else.
Notice Builds on Selig’s January Reset
The notice on March 12 is the latest step in the reset that Selig started in January when he announced that the CFTC would withdraw its 2024 proposed rule that would have restricted political and sports – related event contracts and revoke its 2025 sports advisory.
At that time, Selig said the old framework had created uncertainty and promised new rules that would better reflect the Commission’s view that prediction markets fall within its exclusive jurisdiction as commodity derivatives.
The CFTC’s newly assertive stance on prediction markets, along with yesterday’s announcement, is consistent with what former CFTC regulator Carl Kennedy recently told CasinoBeats. “I think what he’s done is kind of set the stage for himself,” Kennedy said, describing the shift as a process of “withdrawing things, participating in litigation, and now letting you know that our focus is on issuing proposed rules.”
Kennedy also said the next step could be clearer, “listing standards on a categorical basis,” identifying which contracts are “A – OK” and which should prompt a discussion with the commission before going live.
With the public comment period now open, the rule – making process that Selig previewed in January is officially underway, giving the public its first formal opportunity to express their views on how the CFTC should regulate prediction markets.