The comment deadline for the CFTC’s prediction markets proposal is approaching: considerations for commenters

The CFTC’s Notice of Proposed Rulemaking (the Proposal)¹ is intended to clarify how the CFTC will exercise its authority under Commodity Exchange Act (CEA) section 5c(c)(5)(C) (the Special Rule). The Special Rule gives the CFTC the authority to prohibit registered derivatives exchanges from listing event contracts involving certain categories of activities for trading, if the CFTC determines that the event contracts are contrary to the public interest. Specifically, the Special Rule applies to event contracts involving (i) activity that is unlawful under any Federal or State law, (ii) terrorism, (iii) assassination, (iv) war, or (v) gaming (collectively, the Enumerated Activities), as well as event contracts involving “other similar activity” that are determined by the CFTC, by rule or regulation, to be contrary to the public interest.

In the Proposal, the CFTC proposes amendments to its existing contract listing rules (set forth in Part 40 of the CFTC’s regulations) in order to clarify how, substantively and procedurally, the CFTC will determine: (i) when an event contract involves an Enumerated Activity, and (ii) when such an event contract is contrary to the public interest such that it cannot be listed for trading on a CFTC-registered derivatives exchange. 

With the understanding that a key CFTC objective in issuing the Proposal is to further regulatory certainty in prediction markets, below we set forth potential questions about six aspects of the Proposal that commenters may wish to consider as they finalize their feedback to the CFTC. 

1. Determination process 

The Proposal contemplates that the CFTC will determine whether event contracts involve an Enumerated Activity and are contrary to the public interest following exchanges’ submission of the contracts to the CFTC.² New regulatory text, as well as a new appendix to the CFTC’s Part 40 regulations that includes examples, will help to clarify on the front-end – including for contract structuring purposes – when certain types of event contracts are, or are not, likely to be prohibited.

• Will the determination process, as proposed by the CFTC, provide sufficient regulatory certainty to interested parties – including exchanges in connection with contract structuring – regarding the potential regulatory treatment of any specific event contract? Are there enhancements or modifications to the proposed process that could further support regulatory certainty in this regard? 
• Could regulatory certainty be impacted by the CFTC’s proposal to only issue a final determination order if the agency finds that an event contract is contrary to the public interest? Will this proposed approach provide sufficient transparency regarding the factors and analysis that inform a finding that an event contract does not involve an Enumerated Activity, or that an event contract is not contrary to the public interest?
• Would it be helpful for the CFTC to provide further clarity on the front-end, including through additional examples, regarding the potential regulatory treatment of particular types or categories of event contracts? 

2. Transparency of determination process

The determination process outlined in the Proposal contemplates the sharing, during the course of the CFTC’s review of an event contract, of notices, recommendations and responses between the agency, on the one hand, and the listing exchange, on the other. 

• Should the CFTC clarify that this information will be made publicly available?
• The proposed determination process contemplates that the listing exchange would have opportunities to respond to agency analysis and recommendations during the course of the CFTC’s review. Given the public interest considerations informing the determination process, are there other interested parties – including, potentially, other CFTC-registered exchanges or, in the context of contracts involving sporting events, sports governing or integrity bodies – that may be able to provide valuable input as part of the review process?
• Could a determination process that contemplates review not only of the event contract itself, but also of the listing exchange’s self-regulatory tools and compliance infrastructure – i.e., an exchange-specific component to the public interest review – potentially have implications for regulatory certainty and consistency of treatment across exchanges? Would it be more appropriate for the CFTC to clarify that an exchange has an obligation, prior to submitting any derivative contract to the agency in preparation for listing – including any event contract – to ensure that the exchange’s self-regulatory tools and compliance infrastructure can appropriately support trading in that specific contract?

3. Scope of application of determinations 

The Proposal indicates that an order issued by the CFTC determining that an event contract, or consolidated group of event contracts, is contrary to the public interest will apply with respect to that contract or consolidated group of contracts.

• Would it be helpful for the CFTC to provide additional clarity regarding the scope of application of any determination order that the agency may issue – including whether the order will be understood to prohibit only the specific, submitted contracts identified in the order, or also, for example, any other event contracts with the same terms and conditions or underlying event?
• Would it be helpful for the CFTC to provide additional clarity regarding the regulatory treatment of event contracts that are listed for trading when the Proposal, if finalized, becomes effective? For example:
  • How will event contracts listed by an exchange prior to implementation of the Proposal, if finalized, be affected, if at all? If there is the potential for such event contracts to be “grandfathered” (i.e., exempted) from the Proposal’s new listing process and criteria, could there be competitive implications for applicants, or prospective applicants, for exchange registration that have not yet had the opportunity to make contract submissions to the CFTC?
  • Areas of the Proposal suggest that registered exchanges might need to modify listed contracts to conform to any amendments to the Part 40 regulations.³ Would it be helpful for the CFTC to provide additional clarity regarding how this would be expected to be implemented if there is existing trading volume in the contracts? 

4. Trading in contracts under review

The CFTC acknowledges that, under the determination process contemplated in the Proposal, there is a likelihood that an event contract involving an Enumerated Activity could be found to be contrary to the public interest after trading in the contract has begun. The Proposal states that in such a situation, the listing exchange would “cancel the event contract[] and return the purchase price and fees paid by market participants for the event contract[].”

• Would the exchange be required to take this specific approach? Would this always be the appropriate approach? Are there factors, including market stability-related factors, that might weigh in favor of different treatment of an event contract with open interest that has been determined to be contrary to the public interest?
• Should an event contract that is under review by the CFTC be subject to any additional market oversight, or trading guardrails, by the CFTC or the listing exchange during the pendency of the review period?
• The determination process outlined in the Proposal contemplates that an exchange would have the opportunity to propose modifications to an event contract under review by the CFTC. Would it be helpful for the CFTC to provide additional clarity regarding how any such modifications would be expected to be implemented, particularly for a contract in which there is open interest?⁴

5. Substance of contract submissions to the CFTC

It appears that the CFTC’s decision to initiate review of an event contract would be based on the information about the contract – including the contract’s terms and conditions – that is included in the contract submission filed with the CFTC. The Proposal states that, where a self-certified event contract potentially involves an Enumerated Activity, the exchange must concisely explain and analyze in the submission whether the event contract does in fact involve an Enumerated Activity – and, if it does, why the event contract is not contrary to the public interest.⁵ Would it be helpful for the CFTC to provide additional clarity regarding the substance and level of detail the agency would expect to see in this type of explanation and analysis?⁶

6. Coordination and information sharing with sports governing bodies and integrity monitoring organizations

For event contracts involving “gaming” – the definition of which would encompass sports events – the Proposal identifies factors that would weigh against a finding that a contract is contrary to the public interest to include, among other things: 

(i) Whether the underlying game is subject to an established integrity framework; 
(ii) Whether the exchange has established formal information-sharing or coordination arrangements with the league, governing body, or integrity monitoring organization relevant to the underlying game; and 
(iii) Whether the listing exchange maintains appropriate coordination with relevant governing bodies. 

The Proposal posits that coordination and information sharing efforts could entail a practice or agreement whereby the exchange would: 

(a) Report suspicious trading activity or trading activity by prohibited traders to the relevant sports governing body; 
(b) Cooperate with sports governing bodies to provide certain data in connection with sports integrity investigations; 
(c) Consult with sports governing bodies on proposed event contracts; and 
(d) Consult, as appropriate, with relevant governing bodies regarding integrity-related restrictions applicable to marketing, participant protections and event contract design.

• Would it be helpful for the CFTC to provide additional clarity regarding how the exchange would be expected to leverage off of the game integrity framework underlying an event contract, in furtherance of public interest considerations and the exchange’s self-regulatory obligations?
• Given the differing functions that CFTC-registered derivatives exchanges, on the one hand, and sports leagues, governing bodies and integrity monitoring organizations, on the other, play in the sports events ecosystem, would it be helpful for the CFTC to further clarify its expectations regarding the substance of coordination and information sharing among these groups – including how the CFTC would expect coordination/information sharing to support the exchange’s compliance and surveillance programs for sports event contracts, and how the CFTC would expect coordination/information sharing to account for any data protection obligations imposed on these entities?

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If you have any questions about this Legal Briefing, please feel free to contact any of the attorneys listed or the Eversheds Sutherland attorney with whom you regularly work.

_{1 Prediction Markets; Public Interest Determinations, 91 FR 35806 (June 12, 2026). The Proposal is available here: 2026-11854.pdf. 
2 The Proposal interprets the Special Rule to require that the CFTC only make public interest determinations with respect to event contracts following the submission of contracts to the agency. The Proposal does invite commenters to address a different possible reading of the Special Rule that would permit the CFTC to make prospective public interest determinations “so long as the determination relates to a type of event contract that involves an Enumerated Activity and could potentially be listed.” 91 FR at 35839.
3 See, e.g., 91 FR at 35851: “[I]n cases where the event contracts rely on subjective judgement or narrowly controllable outcomes, prediction markets will need to re-design to expand outcomes and eliminate discretion ….”
4 See id. at 35854: “At the end of the review, the Commission may either: (i) issue an order finding the event contract (or a group of event contracts) contrary to the public interest, in which case it may not be listed or must be delisted; or (ii) allow the contract to continue trading if no such order is issued, potentially with modifications proposed by the prediction market that resolve the Commission’s concerns.”
5 Id. at 35839. 
6 Areas of the Proposal contemplate quite significant granularity. See, e.g., id. at 35852: “The Commission believes that the cost of implementation of this factor may require the exchanges to document legality, public-harm considerations, and integrity controls within a § 40.2 submission …”}