The U.S. Commodity Futures Trading Commission (CFTC) on Wednesday proposed its first regulation specifically for prediction markets, outlining a framework to determine whether contracts are in the 'public interest' under federal law. The proposal, open for public comment, addresses contracts involving war, terrorism, assassination, illegal activity, and gaming, which are deemed outside the public interest and thus banned. CFTC Chairman Mike Selig emphasized the need for a durable, transparent framework that allows legitimate markets to move forward while protecting market integrity. The rule introduces a three-part test before banning contracts: first, contracts must be based on an occurring event; second, they must involve one of the prohibited categories; third, the commission must formally decide they are contrary to public interest. The CFTC leans on a multi-factor approach rather than a simple test, weighing hedging utility, price discovery, and potential for illicit behavior. Sports betting contracts, such as those on final scores or player stats, are generally considered in the public interest due to their price discovery functions. The proposal is expected to take effect 60 days after finalization. Currently, the CFTC operates with only one commissioner (Chairman Selig) instead of the required five, raising legal challenges to its policy work. The White House has not made further nominations, leading Democratic senators to demand a full commission as part of crypto market structure negotiations.

Key facts

• CFTC proposed first prediction markets rule on June 10, 2026
• Rule uses three-part test to ban contracts involving war, terrorism, assassination, illegal activity, gaming
• Sports betting contracts generally considered in public interest due to price discovery
• CFTC currently has only one commissioner, raising legal viability concerns
• Public comment period open before finalization

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