McDermott Will & Schulte, a global law firm

The past two weeks have brought an avalanche of news related to a maturing framework of prediction markets oversight from the Commodity Futures Trading Commission (CFTC), two prominent prediction markets (Kalshi and Polymarket), and US Congress:

• On March 12, 2026, the CFTC issued two significant developments addressing the rapidly evolving landscape of prediction markets: An Advance Notice of Proposed Rulemaking (ANPRM) seeking public comment on the regulatory treatment of event contracts, and a staff advisory outlining compliance expectations for exchanges listing such products.
• On March 19, 2026, the CFTC announced a Memorandum of Understanding (MOU) with Major League Baseball (MLB) to facilitate cooperation and information sharing related to the integrity of professional baseball and event contract markets. That news was followed by a Polymarket-MLB partnership announcement, which includes official data sharing arrangements for contract resolutions.
• Both Kalshi and Polymarket have made additional updates to their rulebooks, providing greater clarity and alignment between federal insider trading rules and their own.
• Opposition within Congress concerning the expansion of prediction markets persists, even as the CFTC advocates for a regulatory framework to oversee and advance the industry. Several Congress members have proposed, or voiced intent to propose, legislation targeting prediction markets and contracts across sports and government industries.

These actions were preceded by aggressive CFTC action asserting exclusive jurisdiction over these markets. Taken together, these developments reflect increased regulatory attention to prediction markets, particularly those tied to sporting events, and a growing focus on market integrity, data reliability, and coordination with sports leagues. The ANPRM established a 45-day public comment period, which ends April 30, 2026, providing stakeholders (i.e., anyone who has an interest in, or is impacted in any manner by, prediction markets) with an opportunity to submit comments as the CFTC considers new regulatory approaches.

Key takeaways

• Certain sports-related contracts may face increased regulatory risk. Event contracts tied to individual players, officiating decisions, or other discrete in-game events may be viewed as more susceptible to manipulation, potentially limiting the types of products that can be offered on regulated exchanges. This is on top of the ongoing litigation due to sports-related event contracts sitting at the intersection of federal derivatives regulation and state gaming laws, creating disparate treatment and uncertainty for stakeholders operating across jurisdictions.
• League data and integrity controls are becoming central to these markets. The CFTC is placing increased emphasis on the reliability and security of settlement data, which may elevate the importance of official league data, integrity protocols, and internal controls in supporting these products.
• Sports leagues may play a more direct role in prediction markets. The CFTC is actively encouraging engagement with sports leagues and has begun formal coordination efforts, suggesting that leagues may increasingly act as data providers, integrity partners, and key stakeholders in the development of sports-related event contracts. This was partially prompted by the CFTC urging these markets to consider how contract structure (e.g., team-level vs. player-level outcomes) and data sourcing may affect regulatory viability.
• Prediction markets may begin to resemble regulated sports betting in certain respects. The CFTC’s focus on “gaming” and related concepts indicates that some event contracts, particularly those tied to sports, may be evaluated using frameworks like those applied in traditional gambling and sports wagering regulation.
• Internal policies may need to be revisited. Existing restrictions on betting and use of nonpublic information may not clearly address exchange-traded event contracts, and organizations may wish to review whether personal trading, integrity, and compliance policies adequately cover these products.
• Opportunity to shape the regulatory framework. The CFTC is actively soliciting input through the ANPRM, providing sports industry participants with an opportunity to engage directly with regulators and help influence how these markets develop.

Background

Prediction markets are trading platforms that allow participants to buy and sell contracts, commonly referred to as “event contracts,” that pay out based on whether a specified event occurs. These contracts often have binary outcomes and may be structured as derivatives subject to regulation under the Commodity Exchange Act of 1936 (CEA), including as swaps or futures contracts. Platforms offering such products to US participants generally must register with the CFTC as designated contract markets (DCMs) and comply with the CEA’s core requirements, including obligations related to market integrity, surveillance, and manipulation prevention.

That historically consisted of traditional derivatives exchanges such as the Chicago Mercantile Exchange (CME) and Intercontinental Exchange (ICE), but dedicated prediction markets (such as Kalshi and Polymarket) and other prediction markets registered in the same capacity. To use a sports analogy: The CFTC is acting as the league and the commissioner and the DCMs as the teams.

While the CFTC has historically limited the utilization of prediction markets, that has changed over the past year. Prediction markets have grown from a monthly trading volume of $1.5 billion in early 2025 to approximately $18 billion today. Additionally, there are now approximately nine different prediction markets offering (or prepared to offer) sports-related event contracts with an estimated more than 15 new DCMs who have submitted applications that expect to do so.

This increase in volume is largely because of an increase in the types of contracts offered, which include sports-related; political; “mention markets”; celebrity-focused (e.g., what words will be said in an interview); and those related to traditional financial markets such as economic indicators, mergers and acquisitions, and biotech. The new DCM entrants range from platforms with broad event contract offerings to dedicated sports exchanges and traditional sportsbook operators.

This has also brought a rise in litigation, with many prediction markets facing challenges from state regulators and others asserting that these contracts are a form of gambling and therefore subject to state laws. CFTC Chairman Michael S. Selig has thrown the CFTC’s hat into the ring by filing an amicus brief asserting the CFTC’s exclusive jurisdiction over these markets.