Federal regulators on Wednesday unveiled a sweeping proposal to establish new rules for the rapidly growing prediction markets industry as legal battles continue over whether the platforms constitute federally regulated financial markets or state-regulated gambling.The Commodity Futures Trading Commission, which oversees U.S. derivatives markets, released a 267-page notice of proposed rulemaking outlining what types of event contracts would be permitted under federal law. The proposal comes as prediction market platforms such as Kalshi and Polymarket face scrutiny from state regulators, lawmakers, and gambling authorities over the real-world events on which users can place wagers.According to the CFTC, trading volume across federally regulated prediction markets surpassed $25 billion in 2025, reflecting an increase in both the popularity of event contracts and the range of events available for trading.
“The Commission has recently observed a significant increase in the number of event contracts listed for trading on prediction markets, as well as in the diversity of events underlying such contracts,” the agency said in the proposal.
The CFTC argues event contracts fall within the framework established by the Commodity Exchange Act, which recognizes derivatives markets as serving the public interest by helping participants manage risk and discover prices.
