CFTC proposal limits terrorism, assassination and war bets

On Wednesday, the Commodity Futures Trading Commission released a 267-page proposal that sets federal rules for prediction markets. The draft would allow many sports-related contracts while placing tighter limits on contracts tied to terrorism, assassination and armed conflict.

The proposal says event contracts that depend directly on violent acts or armed conflict would face limits, while many other event contracts would be permitted. As an example, the draft treats a market asking whether the Islamic State conducts an armed attack causing more than ten civilian deaths in Baghdad during a specific month as terrorism-related. A market on whether the Transportation Security Administration improves screening at certain airports would not be considered terrorism-related, the proposal says.

The agency said event contracts based on sports activities are unlikely to raise public-interest concerns and would generally be acceptable for trading.

In a statement, CFTC Chair Michael Selig said, “The CFTC will protect the integrity of our regulated markets without standing in the way of responsible innovation.” He wrote on X, “Rest assured, this will not be the last prediction market rulemaking as the agency continues to balance market integrity with responsible innovation.”

Prediction platforms such as Kalshi and Polymarket let users trade contracts on outcomes ranging from tariff rates to television shows. These markets expanded during the 2024 election cycle and now account for tens of billions of dollars in trading.

The CFTC has moved to assert federal oversight and has at times clashed with state regulators that say the platforms violate local gaming and sports-betting laws.

Regulators have also raised concerns about insider trading and market manipulation. In April, the Justice Department arrested an active-duty U.S. Army soldier who is accused of using classified information to place bets on Polymarket ahead of an operation tied to the capture of a foreign leader. The CFTC and the Justice Department have examined unusual trades tied to former Representative George Santos after Kalshi flagged suspicious activity around his attendance at a State of the Union address.

Congressional lawmakers have proposed bipartisan measures to bar people with access to non-public government information from trading on prediction markets, but those bills have not been enacted.

Platforms have added safeguards in response to regulatory pressure. Kalshi introduced mandatory employment verification for traders in sensitive markets and other anti-manipulation measures. Polymarket has implemented controls intended to deter insider trading and preserve market integrity.

The current proposal replaces an earlier rulemaking that would have broadly restricted event contracts tied to gaming, war, terrorism and assassination; that earlier effort was withdrawn earlier this year. The new draft uses specific contract characteristics to determine when a listing raises public-interest concerns.

The CFTC is seeking public comment as it moves to a final rule. The commission said exchanges designated as contract markets will have primary responsibility for vetting listings and policing trading practices while the agency refines rules addressing market integrity.

Chair Selig, a Trump appointee, has pushed for federal jurisdiction over prediction markets. President Donald Trump has expressed support for exclusive federal oversight. Separately, Donald Trump Jr. has invested in Polymarket through 1789 Capital and serves as a strategic adviser to Kalshi.