CFTC Proposes Strict New Rules for Prediction Markets, Targeting Controversial Wagering
The Commodity Futures Trading Commission (CFTC) on Wednesday unveiled a comprehensive set of proposed rules designed to regulate the burgeoning prediction market sector. The new framework includes provisions that would effectively ban numerous types of controversial markets that have become prevalent on popular platforms such as Polymarket and Kalshi.
Ban on Politically Charged and War-Related Markets
Under the proposed regulations, wagers on the timing of a political leader’s removal from office would be prohibited if the potential path to such an outcome involves war or assassination. This move comes after platforms like Kalshi and Polymarket have previously attempted to circumvent existing prohibitions on war-related markets by offering ambiguously worded bets. These bets often focused on when perceived enemies of the U.S. government, including Iran’s Supreme Leader Ali Khamenei and Venezuelan President Nicolas Maduro, would be “out of office.”
Markets of this nature, which have generated significant controversy and hundreds of millions of dollars in trading volume, would be barred by the CFTC’s new rules. An exception would be made only if these markets explicitly stipulated that they would resolve to “yes” solely in cases of non-violent outcomes, such as electoral defeat, resignation, constitutional removal, negotiated departure, or natural death.
Focus on Ongoing Conflicts and Leadership Changes
Prediction markets that speculate on the outcomes of ongoing U.S. conflicts abroad are currently active on both Polymarket and Kalshi. One notable Polymarket wager, which has seen over $14 million in trades, seeks to determine Iran’s leader by the end of 2026. The current Supreme Leader, Mojtaba Khamenei, is favored with 69% odds. His father, wife, and sister were reportedly killed in joint Israeli-American strikes on Tehran earlier this year.
On Kalshi, a live market with $1.6 million in trading volume is tracking the odds of Reza Pahlavi, the former crown prince of Iran, taking control of the country by year’s end. Pahlavi, an exiled opponent of the Iranian regime, would likely only be in a position to assume power if the current government collapsed or was overthrown.
Representatives for Polymarket and Kalshi did not immediately respond to requests for comment.
Restrictions on Sports-Related Markets
The CFTC’s proposed rules, detailed in a 267-page document, would also impose limitations on certain sports-related markets deemed susceptible to manipulation and contrary to the public interest. These include bets on individual player injuries, referee calls, specific player actions such as particular plays or fouls, and physical altercations between athletes.
However, the CFTC generally views prediction markets on aggregate sports outcomes as permissible and consistent with existing regulations for event contracts. The proposed rulemaking states, “The Commission preliminarily believes that the record supports the conclusion that event contracts involving aggregate outcomes can be operated consistent with the public interest.”
This stance has faced considerable opposition from both Republican and Democratic states, which have argued in federal lawsuits that sports-related prediction markets are essentially unregulated gambling and should be subject to state-level oversight. The U.S. Supreme Court is expected to ultimately rule on this matter.
The CFTC’s proposed prediction market rules are now entering a 45-day public comment period, during which interested parties can submit their feedback directly to the agency.
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