How The CFTC Regulates Prediction Markets: Event Contracts Explained

Prediction markets have become a major talking point across the iGaming and betting world. While they are not a new concept, they have grown rapidly in popularity in recent years, and that growth has pushed governments and regulators to reinforce their frameworks.

That pressure has increased as prediction markets have expanded into political and economic event contracts, raising concerns about insider trading, market manipulation, and broader market integrity.

The Commodity Futures Trading Commission (CFTC) is the US federal agency responsible for regulating derivatives markets and is therefore the main federal regulator involved in the oversight of prediction markets. This guide explains how the CFTC regulates prediction markets and event contracts in the US. Readers who want the wider legal background alongside this article can also explore prediction markets regulation.

What Are Prediction Markets?

Prediction markets are online platforms where users can trade on the outcome of real-world events, and many people see them as adjacent to the wider iGaming and betting industry.

Events that appear on a prediction market platform can range from government elections and sports competitions to fast-moving geopolitical developments. These event markets are also known as event contracts. For readers who need the broader introduction first, this overview of prediction markets helps set the context before moving deeper into the regulatory side.

Prediction markets can also host a much wider range of markets than many new users expect. For example, there are contracts tied to whether the value of bitcoin will move up or down over short intervals, and even contracts linked to how often public figures post on social media within a defined timeframe.

What Are Event Contracts?

In a CFTC context, event contracts are contracts whose settlement depends on whether a particular event or contingency occurs.

The key point is that the contract does not settle based on the value of a traditional asset like a stock or commodity. Instead, it settles based on the outcome of a defined event. That is why event contracts sit at the center of the wider discussion about how prediction markets work.

How Does The CFTC Classify Event Contracts?

In a staff advisory published on 12 March 2026, the CFTC’s Division of Market Oversight described its interpretation of what an event contract is. It said that the term is not clearly defined in the Commodity Exchange Act or the Commission’s regulations, but added that, in its current view, event contracts are a type of derivative contract, often a swap with a binary payoff structure, where settlement is based on the outcome of an underlying occurrence or event.

The Division of Market Oversight also pointed to the Commodity Exchange Act definition of a swap as an agreement, contract, or transaction that provides for a purchase, sale, payment, or delivery dependent on the occurrence, non-occurrence, or extent of an event or contingency associated with a potential financial, economic, or commercial consequence.

This classification is one of the main reasons prediction markets are treated differently from conventional betting products, and it ties directly into the broader debate over whether these products are better understood as gambling or finance.

Which Event Contracts Can Be Blocked By The CFTC?

The Commodity Exchange Act provides that an event contract cannot be listed or made available for trading on or through a registered entity if the CFTC determines that the contract is contrary to the public interest.

Contract Concern	Why It Matters
Assassination	The Act treats certain categories as against the public interest
War	Sensitive event types may trigger public-interest objections
Terrorism	Contracts in these categories can face stronger regulatory resistance

This public-interest standard is one of the most important limits on what can appear on a federally regulated prediction market.

What Are Designated Contract Markets?

Because prediction markets offer event contracts, major platforms such as Kalshi have operated as Designated Contract Markets, or DCMs, under the CFTC framework. That means they are expected to follow the statutory core principles in the Commodity Exchange Act, along with any other applicable CFTC regulations.

For readers comparing operators rather than just the legal framework, a separate look at prediction market platforms can help clarify how different operators fit into the broader market.

Which Core Principles Apply To Prediction Markets?

Regulations that DCMs are required to follow include several core principles that are especially relevant to prediction markets.

Core Principle	What It Requires
Core Principle 3	Contracts listed for trading should not be readily susceptible to manipulation
Core Principle 4	The platform must help prevent manipulation, price distortion, and disruption of settlement
Core Principle 12	The platform must protect markets and participants from abusive practices and promote fair trading

In total, there are 23 core principles in the Commodity Exchange Act that DCMs are expected to follow.

To meet these obligations, the Division of Market Oversight said that a DCM is expected, among other things, to conduct real-time monitoring of trading activity so it can identify disorderly trading and market or system anomalies.

How Does The CFTC Approach Sports-Related Event Contracts?

In the case of sports-related event contracts, the Division of Market Oversight said that DCMs are encouraged to look to league integrity standards and other available guidance in order to protect against manipulation and insider trading, while also protecting the integrity of the relevant league or governing body.

It also said that cooperation with league-run investigations regarding potential manipulation or insider trading may strengthen a DCM’s ability to comply with its obligations under the core principles.

This area is especially important because sports-related contracts often sit close to the line that separates prediction markets from sportsbooks, which is why the distinction is easier to understand when read alongside prediction markets vs sports betting.

How Does The CFTC View Prediction Markets?

On 31 March 2026, the CFTC’s Director of Enforcement, David Miller, outlined the Commission’s enforcement priorities, including insider trading in prediction markets.

Miller said there had been an ongoing myth that insider trading was permissible in prediction markets, as some prominent figures in finance and the media had argued that insider trading laws do not apply in this space.

He said that this is not the case. He argued that insider trading in commodity futures and swap markets is prohibited by the Commodity Exchange Act and CFTC regulations. Miller also said that event contracts fall within the broad statutory definition of a swap, and that the Act’s anti-fraud provisions apply fully in this context. Based on that view, the applicable regulations prohibit insider trading in prediction markets.

The Director of Enforcement also said that the Commission is aware of speculation around insider trading and has the authority to bring cases involving market manipulation, market abuse, and other fraudulent trading practices, which suggests that the sector is under close scrutiny.

Why This Matters Going Forward

Given the rapid growth of prediction markets and the broader push for clearer rules worldwide, it is reasonable to expect that the CFTC will continue refining its regulatory approach to keep pace with the sector.

For operators, that means stronger compliance expectations. For users, it means the legal status of a platform depends not only on access, but also on how that platform fits within the US regulatory framework. Readers who want the state-level angle after this federal overview can continue with are prediction markets legal in the US.