CFTC’s New Prediction Market Rules Could Change Polymarket and Kalshi Forever

Quick Take:

• The U.S. Commodity Futures Trading Commission (CFTC) has proposed new rules for prediction markets.
• The framework could affect platforms such as Polymarket, Kalshi, and Crypto.com.
• The proposal introduces a 90-day review process instead of blanket bans, allowing contracts to be assessed individually.

The Commodity Futures Trading Commission (CFTC) has proposed new rules for prediction markets, a move that could directly impact platforms like Polymarket and Kalshi. Instead of banning specific contracts outright, the regulator plans to review them individually as prediction markets continue to attract millions of users worldwide.

Why Is the CFTC Introducing New Rules?

According to the CFTC press release, the number and variety of event contracts listed on CFTC-regulated exchanges have expanded significantly in recent years, particularly sports-related markets.

To address this growth, the agency has proposed amendments to Regulation 40.11 and the creation of a new Appendix F. The goal is to establish clearer standards for determining whether contracts involve activities identified in the Commodity Exchange Act, including terrorism, assassination, war, gaming, or conduct that violates federal or state law.

CFTC Chairman Michael Selig said the goal is to protect market integrity without blocking innovation.

This proposal gives the Commission a durable, transparent framework to identify the contracts Congress directed us to scrutinize while letting legitimate markets move forward.

How Would the New Review Process Work?

One of the biggest changes is the introduction of a formal 90-day review process.

Under the proposal, the CFTC would follow a three-step approach before restricting a contract.

• First, regulators would determine whether the contract is based on a future event.
• Second, they would assess whether the event falls into one of the categories identified by Congress.
• Finally, the commission would decide whether the contract is contrary to the public interest.

The agency also plans to define key legal terms such as "gaming" and "involve," which have often been at the center of regulatory debates around prediction markets.

Sports Markets Could Benefit From the Proposal

Sports-related contracts appear to be among the biggest beneficiaries of the proposal. The CFTC indicated that contracts tied to game results, tournament advancement, player performance, team statistics, and season outcomes may not automatically be considered against the public interest.

The regulator believes these markets can provide useful information and support price discovery.

However, some highly specific contracts, such as those involving player injuries or detailed in-game events, could still receive additional scrutiny under the proposed framework.

This approach reflects the agency's increasingly positive view of regulated sports prediction markets, a sector that has grown rapidly in recent years.

War and Political Contracts May Face Tougher Scrutiny

While sports markets appear to have a clearer path forward, contracts tied to war, terrorism, political assassinations, or illegal activities are likely to face greater challenges.

The proposal gives the commission flexibility to evaluate these contracts individually rather than banning them automatically. Regulators argue that a multi-factor approach allows them to weigh both potential public benefits and possible harms while still supporting innovation.

What Does This Mean for Polymarket and Kalshi?

The proposal represents one of the most important regulatory developments for the prediction market industry in years.

Polymarket has emerged as the world's largest crypto-based prediction market, while Kalshi operates as a federally regulated exchange in the United States. Both platforms have experienced rapid growth as users increasingly turn to prediction markets to forecast real-world events.

If adopted, the new framework could provide greater regulatory clarity while also giving the CFTC more authority to review controversial markets.

The proposal will now enter a public comment period before any final rules are adopted.