The Commodity Futures Trading Commission revealed a new regulatory roadmap for prediction markets, sparking debate among major platforms and industry leaders over contract approval, manipulation risks, and federal versus state authority
The Commodity Futures Trading Commission (CFTC) has outlined a new three-part regulatory roadmap for U.S. prediction markets, following its first Innovation Advisory Committee meeting of 2026. The session exposed deep divisions between major market participants and regulators over how event contracts should be listed, monitored, and policed, with concerns raised about the potential for manipulation and the adequacy of current self-certification processes.
Regulatory Roadmap and Key Proposals
CFTC Chairman Michael Selig presented a framework that would update how the agency reviews and restricts event contracts, modernize reporting requirements for fully collateralized contracts, and amend rules for how designated contract markets list new event contracts and protect consumers. The roadmap responds to mounting criticism from both industry and lawmakers about the rapid growth of prediction markets and the risks posed to retail participants.
Under current CFTC rules, platforms can self-certify new event contracts without prior agency approval. Since January 2025, more than 2,500 contracts have been self-certified, with none formally opposed by the agency. The CFTC’s new proposals aim to clarify which types of contracts can be prohibited and to strengthen consumer protections, particularly for retail users who may not fully understand the risks involved.
Industry Concerns Over Manipulation and Self-Certification
Industry leaders voiced sharp concerns about the self-certification process and the potential for market manipulation. CME Group CEO Terry Duffy warned that certain event contracts, especially those tied to statements by public figures—sometimes called “mention markets”—could be vulnerable to manipulation. Duffy argued that the lack of agency review before listing such contracts increases the risk of abuse and undermines market credibility.
Robinhood CEO Vlad Tenev also called for closer scrutiny of mention markets, though he stopped short of advocating for a ban. In contrast, Kalshi Chief Operating Officer Luana Lopes Lara defended the need for rapid market creation, arguing that prediction markets must be able to respond quickly to real-world events. The debate highlighted a fundamental tension between innovation and regulatory oversight, with both sides questioning each other’s approach to market integrity and efficiency.
Federal-State Jurisdiction and Legal Disputes
The CFTC reaffirmed its position that it holds exclusive federal jurisdiction over prediction markets, a stance that has led to conflict with state officials who argue that some event contracts constitute illegal gambling under state law. The agency has recently defended federally regulated platforms against state-level legal challenges, including a lawsuit filed by the New York Attorney General against Kalshi in July 2025. CFTC Chairman Selig criticized state efforts to override federal law, warning that such actions could push prediction market activity offshore and outside U.S. regulatory reach.
Prediction markets have also come under scrutiny for potential insider trading, with high-profile cases involving contracts linked to sensitive political or financial information. The CFTC’s roadmap includes plans to address these risks through enhanced reporting and monitoring requirements, but details on enforcement mechanisms remain under discussion.
According to CFTC records, the number of self-certified event contracts has surged since 2025, reflecting both increased market demand and the relative ease of listing new products under current rules. However, the lack of formal opposition or review has fueled debate over whether the existing framework adequately protects market participants and upholds market integrity.
Event contracts, the core product of U.S. prediction markets, allow participants to trade on the outcome of future events—ranging from election results to economic indicators and public statements. Unlike traditional sports wagers, these contracts are regulated as commodities under federal law, with the CFTC serving as the primary oversight authority. The distinction between event contracts and gambling remains a central legal and regulatory issue, especially as state and federal authorities continue to assert competing claims over jurisdiction and consumer protection.
