CFTC Proposes Prediction Market Rules With 90-Day Review as Kalshi Sports Fight Heads Toward Supreme Court
Updated
Updated · City Journal · Jun 29
CFTC Proposes Prediction Market Rules With 90-Day Review as Kalshi Sports Fight Heads Toward Supreme Court
3 articles · Updated · City Journal · Jun 29
Summary
A June 10 CFTC proposal would create a formal framework for prediction markets, adding a definition of “gaming” and preserving the agency’s power to decide whether disputed contracts can trade.
The move lands in Kalshi’s legal battle over sports event contracts, which states, tribes and gambling operators say are illegal betting, while Kalshi and the CFTC argue they are federally regulated swaps.
Proposed Rule 40.11 would define gaming as rule-governed recreational activity with outcomes tied to luck, skill or athletic ability, but still leaves ambiguous guardrails around some sports contracts.
That ambiguity matters because the core dispute is whether Dodd-Frank imposes a categorical ban on gaming-related event contracts or gives the CFTC final authority after a 90-day review.
An April Third Circuit ruling backed federal preemption for sports contracts on CFTC-registered markets, while other circuits are still weighing similar cases, making eventual Supreme Court review increasingly likely.
The CFTC is now defining 'gaming.' Can a federal agency truly draw the line between a financial hedge and a simple bet?
Can tribal gaming sovereignty survive the rise of federally regulated markets that challenge its economic foundations?
$10 Billion at Stake: The Legal Battle Over Prediction Markets, CFTC Authority, and State Gambling Laws
Overview
The Commodity Futures Trading Commission (CFTC) has proposed new rules to create a clearer federal framework for prediction markets, responding to their rapid growth and the need for regulatory clarity. The proposed changes aim to amend existing regulations and introduce new guidelines that define which event contracts may be considered against the public interest, preventing their approval by CFTC-registered entities. This move comes as prediction markets expand into diverse areas, raising complex questions about federal versus state oversight, public interest, and market integrity. The public can submit comments on these proposed rules until July 27, 2026.