CFTC Tells Polymarket & Kalshi: Predict the Election, Not the Assassination 🎯

The U.S. Commodity Futures Trading Commission unveiled a 267-page proposal on June 10 to create a formal framework for regulating prediction market event contracts, targeting platforms including Polymarket and Kalshi. The framework would establish a 90-day review process for determining whether specific contracts violate public interest standards under the Commodity Exchange Act, which lists activities such as terrorism, assassination, war, gaming, and unlawful conduct. Rather than imposing blanket bans, the CFTC would evaluate event contracts individually using criteria tied to market integrity, public-interest concerns, and economic utility, with the public comment period open for 45 days.

CFTC Chairman Michael S. Selig said the agency intends to support innovation while overseeing regulated derivatives markets. "The CFTC will protect the integrity of our regulated markets without standing in the way of responsible innovation," Selig said in the release. The proposal does not automatically classify sports prediction markets as prohibited gaming activity, and it explicitly states that election contracts are not considered "gaming" under relevant federal laws, a distinction that could ease regulatory pressure on Kalshi, Polymarket, and Crypto.com. Contracts tied to final scores, win-loss records, and season stats are described as presumptively permissible, while markets on player injuries, officiating decisions, specific plays, fouls, and physical altercations between players would likely fail the public interest test.

The rules would also bar certain political event contracts, including wagers on the date a foreign political leader might be removed from office when the path to that outcome involves war or assassination. Polymarket and Kalshi have hosted such markets, including a live Polymarket contract on who will lead Iran by the end of 2026 that has drawn over $14 million in trading volume, with Mojtaba Khamenei listed at 69% odds. His father, wife, and sister were killed in joint Israeli-American strikes on Tehran earlier this year. A separate Kalshi market with $1.6 million in volume is tracking the odds that exiled former crown prince Reza Pahlavi will take over Iran by year-end. Under the proposed rules, these markets would resolve to "yes" only in cases of "electoral defeat, resignation, constitutional removal, negotiated departure, or natural death." Representatives for Polymarket and Kalshi did not immediately respond to requests for comment.

The proposal strongly defends federal authority over prediction markets, arguing that the Commodity Exchange Act grants the CFTC exclusive jurisdiction over regulated derivatives and warning that state-by-state enforcement could create "a patchwork of 50 state regulations." U.S. President Donald Trump pressed federal regulators on Tuesday to keep control over the sector, writing on Truth Social that "We cannot have SCUM like Chris Christie, Letitia James, Tim Walz, and JB Pritzker setting the rules," and calling the CFTC's exclusive authority "critically important." The filing notes that prediction market trading volume exceeded $25 billion in 2025, reflecting rapid growth that has drawn regulatory scrutiny, including a U.S. House panel probe into alleged insider trading on the platforms.

Industry participants said the framework offers a principles-based approach rather than blanket approval or prohibition. Gary Kalbaugh, a partner at Cahill Gordon & Reindel LLP in New York, wrote on Wednesday that "Gaming" is defined more broadly than anticipated and sweeps in sports events, adding that "contracts settling on aggregate outcomes (final scores, win-loss, season stats) are presumptively permissible." Kalshi and Polymarket, both of which have reached multibillion-dollar valuations, have deepened ties to traditional finance: Kalshi partnered with Nasdaq to forecast private-company valuations ahead of IPOs, while Polymarket partnered with Dow Jones to integrate real-time prediction market data into media brands including The Wall Street Journal. The proposed definitions of "gaming" and "involve," two terms at the center of ongoing legal disputes, are central to how the new framework will be applied across event-based contracts.