CFTC Chairman Selig Backs Prediction Markets With New Case-by-Case Framework

The move replaces an approach that prior CFTC leadership had tried and failed to advance. In 2024, the agency proposed sweeping amendments to Regulation 40.11 that would have defined “gaming” broadly enough to effectively ban most sports and political event contracts from CFTC-registered platforms. That proposal drew sharp criticism for overreach and was withdrawn in February 2026.

The June 10 rulemaking, formally designated Release No. 9249-26, amends Regulation 40.11 and adds a new Appendix F to Part 40. It is narrowly tailored to address one aspect of a broader Advance Notice of Proposed Rulemaking on prediction markets the Commission published in March 2026.

What the New Framework Does

Instead of categorical prohibitions, the CFTC is proposing a defined evaluation process. When a registered exchange submits an event contract that might fall under Section 5c(c)(5)(C) of the Commodity Exchange Act, the Commission will apply a 90-day review process and a set of public interest factors to determine two things: whether the contract “involves” one of the enumerated activities, and whether it is contrary to the public interest.

The proposal also defines key statutory terms, including “involve” and “gaming,” which have been contested in prior rulemakings.

“The CFTC will protect the integrity of our regulated markets without standing in the way of responsible innovation,” said CFTC Chairman Michael S. Selig. “This proposal gives the Commission a durable, transparent framework to identify the contracts Congress directed us to scrutinize while letting legitimate markets move forward.”

Why Congress Restricted Certain Event Contracts

Section 5c(c)(5)(C) was added to the Commodity Exchange Act through the 2010 Dodd-Frank Act. Lawmakers focused on five categories: terrorism, assassination, war, gaming, and activity unlawful under federal or state law.

In a Senate floor colloquy at the time, Sen. Blanche Lincoln, who helped author the provision, explained the concern directly. The goal, she said, was to prevent the creation of futures and swaps markets that would allow citizens to profit from devastating events and to prevent gambling through futures markets. Sen. Lincoln specifically cited sporting events, stating that contracts tied to outcomes like the Super Bowl or Kentucky Derby would serve no real commercial purpose and would be used solely for gambling.

That legislative history shapes the current rulemaking. The new framework operationalizes those original concerns with defined terms and procedural guardrails.

What It Means for Kalshi and Polymarket

For CFTC-registered platforms like Kalshi, the new framework offers long-sought clarity. Exchanges now have a predictable submission and review process instead of facing enforcement uncertainty. Standard sports outcome contracts, such as game winner markets tied to major events, appear likely to find a viable approval path under the framework. More speculative micro-bet contracts, such as those tied to specific in-game events with higher manipulation risk, face greater scrutiny.

For crypto-native and offshore platforms like Polymarket, the impact is indirect but to some opinions, directionally positive. These platforms operate outside direct CFTC registration and have faced questions about jurisdiction, suspicious trading patterns, and insider information. The NPRM signals the agency’s preference for building a legitimate, federally supervised prediction market ecosystem rather than pushing for prohibition. That posture could reduce legal overhang and support volume growth.

War, terrorism, and assassination contracts remain the clearest candidates for prohibition under the framework.

What Comes Next

The NPRM opens a public comment period, expected to run 30 to 90 days per the Federal Register notice. Industry participants, legal teams, and academics are expected to weigh in heavily on the definitions of “gaming” and “involve,” as well as on the public interest factors the Commission will apply.

Further rulemaking stemming from the broader March 2026 Advance NPRM on prediction markets is also expected. Once the framework is finalized, registered exchanges will test it through new contract filings.

Washington Aims to Tighten the Gate

For free-market advocates, however, the deeper concern is not whether the CFTC has created a more transparent review process, but whether federal regulators should be deciding which voluntary contracts deserve a place on regulated markets in the first place. It can be argued that every restriction on event contracts limits freedom of exchange, narrows opportunities for price discovery, and substitutes bureaucratic judgment for the collective decisions of willing buyers and sellers.

In their view, markets function best when participants, not regulators, determine which risks, probabilities, and outcomes are worth pricing. That debate is unlikely to disappear as prediction markets continue to expand. While the June 2026 proposal offers greater clarity than prior efforts, it still leaves the government in the position of drawing boundaries around permissible information markets.

Regulation supporters see that as prudent oversight; opponents of stifling regulation see it as state-directed market design that pushes activity toward offshore venues and decentralized alternatives. As regulated prediction markets mature, the tension between financial supervision and free-market choice will remain at the center of the conversation.