The Trump administration moved Wednesday to establish the first formal federal framework for online prediction markets, releasing a sweeping 267-page proposal that would prohibit trading on catastrophic events such as war and terror attacks while opening the door to a broad range of sports-related wagering on regulated platforms.
The Commodity Futures Trading Commission issued the proposed rules, which represent the most significant federal attempt yet to define the boundaries of an industry that has grown rapidly and drawn scrutiny from state governments, traditional gambling operators, and financial regulators alike.
What the Proposal Would Allow and Prohibit
Under the framework, prediction platforms such as Kalshi and Polymarket would face an explicit ban on contracts tied to war, assassination, and terrorism. The rules would also likely bar certain granular sports bets — including wagers on individual player props, athlete injuries, refereeing decisions, and physical altercations during games — though the agency left room for public input before finalizing those provisions.
At the same time, the proposal would permit a wide range of general sports betting to operate through prediction market platforms, a significant expansion of what these companies have been permitted to offer under existing CFTC oversight.
CFTC Chairman Michael Selig framed the proposal as a balance between consumer protection and market development. “The CFTC will protect the integrity of our regulated markets without standing in the way of responsible innovation,” he said.
Critics pushed back swiftly. Benjamin Schiffrin of the advocacy group Better Markets argued the agency had tilted too far toward the industry, saying the proposal “cements the CFTC’s role as the prediction market industry’s biggest cheerleader.”
A Commission Operating With Vacancies
The proposal comes from a commission operating well below full capacity. Of the CFTC’s five seats, four are currently vacant, meaning the agency is issuing a major regulatory framework with only its chairman confirmed. The public will have 45 days to submit comments on the proposal before the CFTC moves toward a final rule.
By the Numbers
267 pages — the length of the proposed regulatory framework released Wednesday.
4 of 5 — seats currently vacant on the CFTC commission.
45 days — the public comment window before rulemaking can advance.
$1 billion — the estimated annual gambling tax revenue that the American Gaming Association says has been displaced by online prediction markets.
States Acting Ahead of Federal Rules
The federal proposal arrives amid a growing patchwork of state-level responses to prediction markets. Minnesota became the first state to formally ban the platforms when Democratic Gov. Tim Walz signed a prohibition into law last month. The CFTC subsequently sued to block the Minnesota law from taking effect, arguing federal authority supersedes state restrictions on these products.
Kalshi, one of the leading prediction platforms, has pursued its own legal challenges on the state level. The company sued Utah and its Republican Gov. Spencer Cox earlier this year after the state sought to restrict prediction market activity — a notable move given that Utah’s constitution has prohibited gambling since the state’s founding.
The legal disputes reflect a fundamental disagreement over whether prediction markets constitute financial instruments regulated at the federal level or gambling products subject to state oversight. The CFTC’s position, reinforced by Wednesday’s proposal, is that these platforms fall squarely within its jurisdiction as derivatives markets.
Broader Industry Tensions
Traditional casino and sportsbook operators have raised alarms about prediction platforms capturing a growing share of the sports betting market without being subject to the same licensing requirements and tax obligations that apply to regulated gambling. The American Gaming Association’s estimate of $1 billion in displaced tax revenue has added urgency to calls for clearer rules. Federal lawmakers have also begun connecting financial market stability to broader geopolitical pressures, reflecting the administration’s wider economic policy agenda.
What’s Next
The 45-day comment period will allow industry groups, state regulators, gambling operators, and consumer advocates to weigh in before the CFTC drafts a final rule. The commission will need to address its vacancy situation — likely requiring Senate confirmation of new members — before it can take a final vote on the framework. The outcome of the CFTC’s legal challenge against Minnesota’s ban is also expected to shape how aggressively states can act in the interim.