Game Changer: CFTC Clarifies Sports Contracts Listing Standards and Seeks Input on Event Contracts More Generally

The Commodity Futures Trading Commission (CFTC or Commission) made waves on March 12 with two pivotal releases intended to shape the regulatory framework for prediction markets. 

In Letter No. 26-08, the CFTC’s Division of Market Oversight (DMO) provided guidance to designated contract markets (“DCMs”) on the listing and trading of event contracts, with particular focus on sports-related prediction markets (the Advisory).[1] Meanwhile, concurrently with DMO staff’s issuance of the Advisory, the single-commissioner Commission adopted an Advance Notice of Proposed Rulemaking (ANPRM) opening the floor for public dialogue on several aspects of the prediction markets regulatory framework. 

The Advisory: Focused on Sports-Related Contracts and Ensuring Market Integrity 

While the Advisory signals the CFTC's support for innovation in this space, it identifies specific contract categories presenting heightened manipulation risks, including contracts based on the actions of single individuals, officiating decisions, player injuries, and unsportsmanlike conduct, and establishes new expectations for compliance, surveillance, and engagement with sports leagues.

The Advisory carries significant implications for all market participants. DCMs should expect enhanced scrutiny of self-certification submissions and are strongly encouraged to engage proactively with both DMO staff and relevant sports leagues or governing bodies before listing contracts in elevated-risk categories. Futures commission merchants (FCMs) and introducing brokers should assess whether their compliance and surveillance programs adequately address the unique risks posed by event contracts, including insider trading considerations under Commodity Exchange Act Section 6(c)(1) and CFTC Regulation 180.1. Notably, the Advisory reminds DCMs that the Commission retains authority to stay a self-certified product listing pending proceedings for a false certification filing, including certifications that a contract is "not readily susceptible to manipulation" under DCM Core Principle 3. While the Advisory does not impose mandatory requirements, its strong encouragement of pre-certification engagement with DMO staff and its explicit statement that such engagement “may reduce the likelihood of Commission action” suggests that the absence of proactive consultation could weigh against a DCM if enforcement questions arise.

The ANPRM: 40 Questions, 45 Days to Comment 

On the same day, the CFTC published an ANPRM seeking public comment on the broader regulation of prediction markets.[2] The ANPRM reflects the Commission's recognition that event contract listings have increased dramatically — from an average of five per year between 2006 and 2020 to roughly 1,600 in 2025 — and that multiple entities have applied for, or expressed interest in, DCM registration to operate prediction markets. The Commission is soliciting input on a wide range of topics, including the application of DCM Core Principles to prediction markets, standards for determining when contracts are "contrary to the public interest," and insider trading considerations. 

Notably, the ANPRM observes that certain event contracts could be considered security-based swaps and therefore fall under the Securities and Exchange Commission’s (SEC) jurisdiction.[3] The ANPRM also references the joint CFTC/SEC interpretation that certain contracts entered into by natural persons primarily for personal, family, or household purposes are not considered swaps or security-based swaps, and seeks input on whether event contracts should similarly be excluded from the swap definition under that interpretation.[4] Additionally, the Commission seeks input on whether advertising and marketing limitations — similar to those found in gambling laws — should apply to event contracts, and how best to protect market participants from fraudulent and abusive sales practices.

Given the importance of these issues, the CFTC has provided a 45-day comment period following publication of the ANPRM in the Federal Register. This will not be the last time interested parties will have a chance to share their views, as the ANPRM is a preliminary step in the rulemaking process. 

Responses to the ANPRM will allow the CFTC to gather information and insights from market stakeholders, including industry participants, the public, members of Congress, as well as other impacted industries and parties (e.g., state authorities, Indian tribal groups, trade associations, etc.). 

The CFTC aims to identify issues, gather data, and explore different perspectives on potential regulatory approaches to overseeing prediction markets.

Industry stakeholders can expect that, after considering feedback from the ANPRM, the CFTC will use those insights to develop a more detailed Notice of Proposed Rulemaking that includes specific proposed regulations. The CFTC will then invite further comments on its specific proposals.