CFTC Tells Polymarket & Kalshi to Read the Fine Print 📜

The U.S. Commodity Futures Trading Commission unveiled a proposed framework on June 10 to govern prediction markets, laying out a structured 90-day review process for event contracts on platforms including Polymarket and Kalshi rather than imposing sweeping bans on contract categories. The 267-page filing was reported by The Wall Street Journal and Decrypt, and introduces formal definitions for terms such as "gaming" and "involve," two concepts at the center of ongoing legal fights over event-based contracts.

The proposal would prohibit markets that resolve based on war, terrorism, assassination, or other unlawful conduct as contrary to the public interest. Specifically, it would bar wagers on the date a political leader is removed from office when the path to that outcome includes war or assassination, unless the contract specifies that it would only resolve to yes in non-violent cases of "electoral defeat, resignation, constitutional removal, negotiated departure, or natural death." That language directly targets contracts Kalshi and Polymarket have offered on the ouster of figures such as Iranian Supreme Leader Ali Khamenei and Venezuelan president Nicolas Maduro.

CFTC Chairman Michael S. Selig said the agency wants to preserve innovation while maintaining oversight of regulated derivatives markets, stating, "The CFTC will protect the integrity of our regulated markets without standing in the way of responsible innovation." The agency said prediction market trading volume exceeded $25 billion in 2025, underscoring the sector's rapid expansion.

On the sports side, the proposal stops short of categorically banning event contracts, leaving room for contract-by-contract review and avoiding an automatic classification of sports markets as prohibited gaming. The framework identifies categories it would restrict, including individual player injuries, referee calls, specific plays, and physical altercations between players, while leaving broader sports outcome markets generally permissible. Platforms Kalshi and Crypto.com have faced state-level pressure arguing such products function as unlicensed gambling.

The filing also asserts federal primacy over the sector, warning that state-by-state enforcement could create "a patchwork of 50 state regulations." That stance aligns with U.S. President Donald Trump's Tuesday Truth Social post calling federal control over prediction markets "critically important" and attacking state officials by name, including Chris Christie, Letitia James, Tim Walz, and JB Pritzker. A House panel has separately opened a probe into alleged insider trading on Polymarket and Kalshi, while one open Polymarket market on Iran's leadership by the end of 2026 has drawn over $14 million in trading volume and a Kalshi market on Reza Pahlavi taking over Iran by year-end has recorded $1.6 million in volume. Representatives for Polymarket and Kalshi did not immediately respond to requests for comment.