- ▸ The CFTC’s proposed rule would define “gaming” under the Commodity Exchange Act, giving the agency a clearer framework for reviewing sports and event contracts.
- ▸ The proposal would not ban sports markets outright, but it would likely block micro-bets, injury markets and contracts tied to other outcomes the Commission says raise manipulation or integrity risks.
- ▸ The rule would create a 90-day review process for certain contracts and could strengthen the CFTC’s position in ongoing legal fights over state attempts to restrict prediction markets.
The Commodity Futures Trading Commission (CFTC) published its long-awaited prediction markets proposed rule Wednesday, putting the first formal regulatory text for event contract derivatives on the table after years of litigation, a withdrawn 2024 proposal, and a compressed rulemaking process that moved from ANPRM to White House review in under a month. The proposed rule is a pre-publication version subject to Federal Register technical corrections. A 45-day public comment period will open upon publication.
The rule does not ban sports contracts, but it does set a framework for when they can be listed. It also draws four clear lines around contract types that would likely be prohibited.
The rule does not ban sports contracts, but it does define “gaming” for the first time under the Commodity Exchange Act (CEA), establishes a multi-factor public interest test the Commission must apply before prohibiting any contract, and draws four specific lines around contract types that would likely not survive that test.
The gaming definition
The rule’s most consequential provision is a new statutory definition of “gaming” under CEA Section 5c(c)(5)(C), the term that determines which contracts fall within the CFTC’s public interest review authority in the first place.
The proposed definition, codified in § 40.11(b), reads: “Gaming means any activity that: (i) one or more participants typically engage in for purposes of recreation or to entertain others; (ii) is governed by rules; and (iii) includes measurable occurrences or outcomes that depend on the participants’ luck, skill, or athletic ability during the activity.”
Sports contracts including who wins, final scores, point differentials, tournament advancement, and individual or team statistical performance fall within that definition. So does roulette. The distinction the rule draws is not between sports and casino games, but between contracts the Commission would likely permit and contracts it would likely prohibit, using a multi-factor public interest analysis.
Political elections are explicitly not gaming under the proposed definition: “Elections typically serve the purpose of selecting political leadership, not recreation or entertainment. Their outcomes do not turn on the participants’ luck, skill, or athletic ability during the election itself.”
Nobel Prizes, Academy Awards, and the Cy Young Award are also not gaming. They are “contests” whose outcomes depend on evaluative judgments by panels, not measurable occurrences in an activity.
What sports contracts would likely survive and what would likely be prohibited
The rule identifies broad-outcome sports contracts like final scores, season-long statistics, and tournament advancement as the category least likely to raise public interest concerns. The Commission cites their price discovery utility, objective settlement data, and distributed manipulation risk: “An event contract involving the aggregate outcome of a single game typically depends on the cumulative contributions of many participants over the course of the game; no individual participant has determinative capacity to affect settlement.”
Four categories of sports contracts would likely be found contrary to the public interest:
- Player injury contracts: Those that “explicitly settle solely by reference to the duration, severity, occurrence, or medical diagnosis of an injury sustained by a specific athlete.” The Commission cites perverse financial incentives, medical privacy concerns, and non-objective settlement.
- Officiating outcome contracts: Contracts settling “solely by reference to judgment calls, discretionary decisions, or rulings of referees, umpires, or other game officials.” The Commission cites as precedent the case of Tim Donaghy, the former NBA official who pleaded guilty in a betting scheme involving inside information.
- Micro-bet contracts: Those settling “solely by reference to a discrete action, event, or occurrence,” including “the type or outcome of a specific pitch thrown by a specific pitcher, the outcome of a specific shot taken by a specific player, or whether a specific player or team commits a specific foul or penalty.” The Commission finds these contracts provide no meaningful information and raise manipulation risk because “a single player or team coaching staff member can determine the settlement outcome.”
- Pre-collegiate sports: The Commission cites weak integrity infrastructure, decentralized data, and potential concerns about marketing information related to minors. Professional and international competitions sanctioned by recognized governing bodies are explicitly excluded from this category.
Games of pure random chance like roulette and slots are likely contrary to the public interest as a separate category. Poker, where skill operates over many rounds in organized tournaments, would be evaluated differently.
Process and what it does not settle
The proposed rule amends Part 40 to require the Commission to affirmatively determine that event contracts are contrary to the public interest before prohibiting them, replacing the current text’s ambiguity over whether a finding is necessary at all. The Commission proposes a 90-day review process triggered when it determines a contract may involve an enumerated activity. A delegation of authority provision allows the Director of the Division of Market Oversight to initiate review.
The rule would take effect 60 days after publication of a final rule in the Federal Register.
What the rule does not do is settle the preemption fight. The CFTC has asserted exclusive federal jurisdiction over prediction markets in litigation spanning more than a dozen states, winning preliminary injunctions in the Third Circuit, while a Ninth Circuit panel, which heard oral arguments in April in cases where a district court found the opposite, has not yet ruled. The proposed rule sharpens the CFTC’s legal argument and gives it a concrete regulatory text to cite in those proceedings. It also gives opponents a specific document to potentially challenge under the Administrative Procedure Act.
How we got here and what comes next
The rule is the product of a rulemaking process that began in February when the CFTC withdrew its 2024 proposal and relaunched with an ANPRM on March 16 drawing over 3,500 comments. Under Executive Order 14215, the CFTC submitted the rule to OIRA for review, required of independent agencies under the Trump administration. It cleared that review on June 5 as “Consistent with Change” with an Economically Significant designation, meaning projected annual economic effects of $200 million or more.
The stakes of the gaming definition are high, with more than a dozen active court cases hinging partially on that aspect of the statute. DeFi Rate’s volume data shows sports running at 84–85% of Kalshi’s weekly notional volume in recent weeks. With the World Cup group stage about to kick off, that percentage has the potential to push into the low-90s over the next two months.
The comment period runs 45 days from Federal Register publication. After that, Selig must review submissions, hold a vote, and publish a final rule, with the rule taking effect 60 days after that. A bipartisan letter from House lawmakers who oversee the CFTC has asked President Trump to fill the commission, arguing the public and markets “will be best served by a full five-member commission” and that a full slate would produce “more durable rules.” Senator Warren, in a letter to Selig filed June 8, went further, citing the Polymarket approval, the Gemini enforcement reversal, and staff departures as “concerning signs of a CFTC beholden to political pressures” and requesting a record of communications between the CFTC and prediction market firms by June 18.
A proposed rule written by a sole commissioner, navigating that level of scrutiny, will need to survive not just a comment period but an APA challenge surface that critics are already mapping.
