- ▸ Most of Oliver’s worst examples like tragedy markets and suspiciously-timed geopolitical trades took place on Polymarket’s unregulated, offshore platform.
- ▸ Congress gave the CFTC explicit authority to block event contracts contrary to the public interest, but the agency has yet to conduct those reviews. But rulemaking could clear up what is and isn’t allowed.
- ▸ The CFTC is asking the right questions about advertising standards in its ANPRM, but the current gap is apparent.
John Oliver dedicated 32 minutes of his HBO show Last Week Tonight to prediction markets on Sunday night. The comedy news show with millions of viewers marked another mainstream cultural moment for prediction markets that didn’t paint the emerging financial vertical in the best of light.
Oliver’s segment was entertaining and largely fair, but missed an important distinction and framed the debate as a binary: either these platforms are a quasi-legal gambling racket or a naive “truth machine” for the masses. The more productive question isn’t whether prediction markets should exist, but which ones should, under what conditions, and who decides. That question is now formally before the CFTC, which published an Advance Notice of Proposed Rulemaking (ANPRM) in March that could define this industry for generations to come, though the courts may beat them to an answer.
“How is this legal?” Well, some of it isn’t.
Oliver asks, fairly, how any of this is legal. The answer demands some nuance. Firstly, some of it isn’t legal, an important point of clarification. For example, when Polymarket actively promoted whether a dildo would be thrown at a WNBA game, it was on their unregulated blockchain-based global platform, not on a US-regulated prediction market exchange.
Oliver’s segment conflates two very different products, as other mainstream coverage has also done. The Nancy Guthrie kidnapping market Oliver cited as an example of prediction markets at their darkest was also not available on any CFTC-regulated US platform, contrary to what the monologue stated. It appeared on Polymarket’s offshore international version, based in Panama, which American users can only access by illegally masking their location with a VPN or other method. Polymarket’s US app, which operates under CFTC oversight, is currently limited to a far narrower set of markets. That distinction matters as a lot of the industry’s worst examples live specifically in the offshore, unregulated layer. Using them to criticize the regulated US market muddies a policy debate that’s already complicated enough.
As for the regulated ones, Oliver points out they are not new. The concept traces back to academic experiments in the late 1980s, but what gave event contracts their current legal footing is Dodd-Frank. Passed in 2010, the law broadly defined the derivatives subject to CFTC oversight to include contracts based on any “occurrence, extent of an occurrence, or contingency” beyond the control of the parties, language expansive enough to cover a binary contract on a hurricane landfall, a Fed rate decision, or an election outcome. Under CEA Section 1a(47), such contracts can qualify as federally-regulated swaps rather than bets, provided a financial, economic, or commercial consequence exists.
Regulatory rein-in framework that hasn’t been tapped
The Dodd-Frank Act empowered the CFTC more than a decade ago to block event contracts involving terrorism, assassination, war, and gaming, if deemed to also be contrary to public interest. The carve-out acknowledged that even as the law opened the door to event contracts, some outcomes were never meant to come through it.
The specific provision is CEA Section 5c(c)(5)(C), which gives the CFTC explicit power to conduct public interest reviews of event contracts and prohibit those contrary to the public interest. Congress included the clause in Dodd-Frank precisely because it anticipated that event contracts could implicate concerns well beyond ordinary commodity markets. As Norton Rose Fulbright’s recent analysis notes, DCMs are reminded they must comply with 23 statutory Core Principles when listing event contracts, and the CFTC retains authority to prohibit any contract it determines contrary to the public interest. So if there are contracts on federally-regulated exchanges that shouldn’t be listed, as Oliver implies, the problem is more a gap in agency action than a gap in the law.
That gap came into sharp focus last week at the Ninth Circuit. As DeFi Rate covered from the hearing, Judge Ryan Nelson questioned whether the CFTC had ever exercised its power to review certain contracts, including those related to sports, to determine whether or not they were in the public interest. “The CFTC isn’t reviewing any of these contracts,” he said during the hearing. A CFTC lawyer told the court that upcoming CFTC rulemaking would address questions around public review (and Rule 40.11 clarifications), but it likely will not happen before courts have to make their rulings.
The middle ground
While Oliver doesn’t focus on it much, the legitimate use cases for prediction markets are not a fiction. A business hedging against a government shutdown, an importer pricing in tariff risk, a portfolio manager using Fed rate decision markets as an input and so on are defensible applications of event contracts, not far removed from what commodity futures markets have done for a century. Institutional adoption already shows prime brokers, hedge funds, and ARK Invest now building systematic workflows around prediction market data, a signal that the forecasting value is real in the right contexts.
Of course, the friction enters with the high volume of speculative retail trading alongside aggressive “betting”-focused marketing. Where the “financial instrument” argument weakens is exactly where Oliver lands his punches: on certain sports, celebrity gossip, and tragedy markets. Which brings us back to ambiguity around Rule 40.11 and the CEA’s enumerated categories, as well as lack of explicit examination of what contracts are within or contrary to public interest.
The CFTC wants to rein in markets that are easily manipulated
The CFTC has flagged “readily susceptible to manipulation” as a key disqualifying factor for event contracts. While already in the statute, applying it to prediction markets requires new analytical frameworks. Oliver cites several examples of what looks like insider trading. Once again, it’s worth being precise about where they occurred. The most alarming ones, including suspiciously timed trades ahead of the Nicolas Maduro seizure, the US strike on Iran, and the Iran ceasefire announcement, all happened on Polymarket’s offshore global platform, which American users can only access by masking their location. Other examples involving potential information advantages, and the broader question of which US-listed contracts are structurally susceptible to manipulation, are legitimate concerns for the regulated market too, and ones the CFTC’s rulemaking will need to address directly.
Sports markets are one clear current test case. Kalshi has argued NFL team markets serve a legitimate economic purpose and are thus fair game for event contracts. The NFL has named specific contract types it considers out of bounds with officiating decisions, player injuries, draft picks, and broadcast mention markets among them. They sent letters directly to CFTC-registered platforms asking them to stop offering markets easily subject to manipulation. CFTC chair Michael Selig signaled the agency is listening: “If a league is telling us that a contract is going to be readily susceptible to manipulation and an exchange is still trying to certify that, of course we’ll evaluate the risks there. The leagues are very well positioned to make those calls.”
But where will the CFTC ultimately draw the line? Renown prediction market trader “Domer” outlined why he agreed with prohibiting many of the markets the NFL listed, and why some of the others are justifiable. His criteria centered on ease of manipulation (by a single or small group of participants) as well as real world impact and useful forecasting through price discovery.
“It is totally sensible to have markets on the draft/coaching, both in the sense of predicting something important, but also as a source of relevant information that can be digested by & communicated to people that care about the answer,” says Domer.
A mostly reasonable request from the NFL, and glad they are proactive about this. Prediction markets should focus on making markets on topics that are important.
— Domer❤️🔥 (@Domahhhh) March 30, 2026
What announcers say during games or whether "celebrities" attend games — excluding Trump and Taylor Swift — only… https://t.co/QfQQeY7mbj
Where the CFTC decides to draw the line in forthcoming rulemaking, based on statutes, public comments, and other factors, is a central event to watch in the coming weeks.
Marketing contradictions reveal another regulatory gap
Oliver’s sharpest observation may be about advertising. Kalshi’s Florida TV ad, which he describes as an “AI slop atrocity” featuring shirtless men, alligators, and people being chased by police, is entertainment category gambling promotion. The same platform’s legal argument leans on their categorization as financial instruments, not bets, a contradiction that Judge Nelson acknowledged in the Ninth Circuit hearing last week.
The mismatch also exposes another current regulatory gap. The CFTC governs contracts and exchanges, but advertising and influencer marketing fall into a gray zone with no prediction-market-specific rules. Oliver notes that Kalshi confirmed it paid the TikToker featured at the top of his segment, a disclosure that apparently wasn’t visible to viewers without a journalist asking. The FTC’s general influencer disclosure rules apply, but they weren’t designed for speculative financial products being marketed to a general audience with no risk warnings clearly displayed.
According to its ANPRM, the CFTC is specifically seeking comment on advertising restrictions and “responsible gaming standards,” including self-exclusion programs and monetary limits, as part of its public interest analysis. Those questions are directly relevant to how these platforms market themselves, not just what they list.
Regulated exchanges are not passive platforms. As DCMs operating under self-certification, they bear affirmative compliance obligations. But specifics around product promotion, including by paid third parties, is in serious need of clarification.
What comes next
The political environment makes aggressive near-term rulemaking difficult, but the CFTC says it’s coming soon. Meanwhile, a Ninth Circuit ruling against the platforms would create a circuit split with the Third Circuit’s recent Kalshi win in New Jersey, making Supreme Court review likely. The CFTC’s own ANPRM pointed to the rulemaking process as where clarity will eventually arrive, but after last week’s hearing, the collective understanding is that the courts may not wait.
Oliver is right that this industry has scaled faster than the rules governing it. But the rules, largely, already exist. The question is whether the agency charged with enforcing them will use them, and clarify rules where ambiguity exists, or whether Judge Nelson will have answered that question first.
You can watch the John Oliver HBO segment on YouTube here:
