Forty Questions, Fifteen Days: Inside the CFTC's Prediction Market Rulemaking

*The Innovation Stack*

On March 12, 2026, the Commodity Futures Trading Commission did something it had tried twice before and twice abandoned. It opened a rulemaking on prediction markets. By publication in the Federal Register at 91 FR 12516 on March 16, the Commission set a clock running: forty-five days, closing at 11:59 p.m. Eastern on April 30, 2026. As of this writing the clock has sixteen days remaining, the docket holds roughly 780 comments, and the operators whose businesses will be reshaped by what the Commission does next have, almost without exception, said nothing on the record.

That silence is the story. A campaign run by a progressive advocacy group called More Perfect Union stuffed the file with 570 near-identical letters between April 3 and April 8, all urging the Commission to prohibit contracts "readily susceptible to manipulation" and to ban markets referencing military operations, terrorism, and assassinations. A handful of senators wrote in. So did the NCAA's Charlie Baker and the National Thoroughbred Racing Association. Two new platform hopefuls, Primev, Inc. and if.market, filed to stake out territory. But Kalshi has not filed. Polymarket has not filed. Robinhood has not filed. Crypto.com has not filed. Neither have DraftKings, FanDuel, Coinbase, or CME. The lawyers at Skadden and Sullivan and Wilmer Hale have not filed. What arrives on April 30 will either be the thinnest record the CFTC has ever built a rulemaking on, or it will be preceded by a twenty-four hour avalanche of institutional commentary designed for a small audience of four Commissioners and the handful of Division staff who will draft the NPRM that follows.

This article is a reader's guide to what the Commission asked, what it is really after, and what the absent parties are trying to say by not yet answering.

The Event and Why It Qualifies

This piece hits the regulatory-update beat at its core. The CFTC is proposing to define, for the first time, how its twenty-three statutory core principles apply to event contracts traded on designated contract markets. It has paired that exercise with a companion advisory from the Division of Market Oversight that describes a specific category of contracts, sports event contracts referencing injuries, unsportsmanlike conduct, and officiating decisions, as potentially problematic under the "contrary to the public interest" standard in Section 5c(c)(5)(C) of the Commodity Exchange Act. The ANPRM does not propose rules. It asks forty questions, a structure the Commission uses when it wants a record built for future decisions it has not yet made. But the record will be used. Commission staff are already reviewing several pending applications for DCM designation from entities that have openly stated an interest in operating prediction markets. Whatever the Commission writes next will condition those approvals.

The factual record is straightforward. From 2006 through 2020, DCMs listed for trading an average of roughly five event contracts per year. In 2021 the count jumped to 131. In 2025 it was approximately 1,600. That number is the pressure behind the rulemaking. The Commission's self-certification process under Regulation 40.2 is a one-business-day review. Its "special rule" review under Regulation 40.11, covering contracts referencing activities the Commission has determined to be contrary to the public interest, has been used exactly once in fifteen years, and the exchange in that case, Nadex, withdrew the contracts rather than fight. A regime designed for modest bespoke derivatives is now processing thousands of retail-facing instruments pegged to sports, politics, and weather. Something had to give.

A. The Live Disputes

No rulemaking moves in isolation, and this one moves alongside the most active prediction-market docket in American legal history.

The lead case is *KalshiEX LLC v. Flaherty*, in which the U.S. Court of Appeals for the Third Circuit, on April 6, 2026, affirmed the preliminary injunction Judge Andrew Bumb issued from the District of New Jersey, holding that New Jersey's gaming regulators are likely barred by the CEA from enforcing state gambling laws against Kalshi's sports event contracts. The panel's reasoning sits squarely inside the ANPRM's central question, because it treats the Commission's jurisdiction over event contracts as exclusive in a way that forecloses parallel state oversight. The Nevada companion, *KalshiEX LLC v. Nevada Gaming Control Board*, is on the opposite track in the Ninth Circuit after Chief Judge Miranda Du of the District of Nevada declined to enjoin the state in early 2025, and the appeal was argued in March 2026 with an opinion expected late summer. The split is real, and the Supreme Court is reachable by any of the losing sovereigns.

Around the core case sit satellites. On April 2, 2026, the CFTC and the Department of Justice jointly filed suit against Illinois, Arizona, and Connecticut in the Northern District of Illinois, the District of Arizona, and the District of Connecticut, seeking to permanently enjoin those states' cease-and-desist regimes as preempted. On April 10, Judge Steven Logan of the District of Arizona granted a preliminary injunction, paused Arizona's criminal prosecution of Kalshi, and wrote that the CFTC was likely to succeed on its preemption theory because event contracts fall within the CEA's definition of "swap." On April 14, the Ohio Casino Control Commission issued a Notice of Violation proposing a five million dollar fine against Kalshi for unlicensed sports betting, a move the ANPRM's preemption discussion will either validate or quietly render moot. *KalshiEX LLC v. Ohio Casino Control Commission*, pending in the Southern District of Ohio before Judge Sarah D. Morrison, is live after the court denied a preliminary injunction in March. A Montana case filed last week joins the list. So does *Commodity Futures Trading Commission v. Connecticut*, where the state has not yet answered.

These cases are the ANPRM's shadow record. Every clarifying line the Commission writes will be cited in at least one of them, and several of them will return arguments to the CFTC in the form of judicial pressure on what "exclusive jurisdiction" is supposed to mean when states insist on their traditional police power over gambling.

B. The Frame History Gives Us

Two precedents do the framing work here, and a reader who holds them in mind will read the ANPRM more clearly than most of the filers.

The first is the legislative history of Section 5c(c)(5)(C) itself. When Congress added the "event contract review" mechanism through Section 721 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, it responded to the previous decade's political markets. Iowa Electronic Markets, Intrade, and the Pentagon's aborted Policy Analysis Market had convinced Congress that the Commission needed affirmative tools to prohibit contracts referencing terrorism, assassination, war, gaming, and unlawful activity, together with a residual category for anything the Commission determined to be contrary to the public interest. The "gaming" entry was the one Congress argued about. The term was left undefined. A rulemaking that starts forty questions with "how should the Commission interpret 'gaming'" is one Congress deliberately invited.

The second is the body of case law that defines what counts as a "swap" and what counts as a DCM's jurisdiction. *Commodity Futures Trading Commission v. Intercontinental Exchange, Inc.*, litigated in the mid-2010s, settled the point that a contract with contingent payoffs based on a future outcome is a swap for CEA purposes when it is traded on a DCM. Judge Logan's Arizona order rests directly on that chain of authority. So does the Third Circuit's Flaherty opinion. Neither decision resolves what the CFTC asks now. Both decisions assume the Commission has said something definite about when event contracts are "gaming" and when they are not. The Commission has not said anything definite. The ANPRM is the Commission asking whether it should.

*Murphy v. NCAA*, 584 U.S. 453 (2018), is the third touchstone. Its anticommandeering holding is often cited for the proposition that sports wagering is a state matter. Read properly, Murphy decided only that Congress cannot compel states to maintain gambling prohibitions. It left Congress free to preempt state law directly, and the CEA's exclusive jurisdiction clause is exactly that kind of affirmative federal rule. Murphy is the frame operators need for the political defense of federal prediction markets. It is also the frame states lean on for their police-power argument. Both sides are partly right, which is why the ANPRM matters.

C. Rulemaking and Legislation in Motion

The ANPRM is itself the docket. Federal Register citation 91 FR 12516. Press release 9194-26. Submission portal open at the CFTC comments site. Commission Chairman Michael S. Selig's statement framed the initiative as part of the Commission's "continued effort to promote responsible innovation" and as an affirmation of "exclusive jurisdiction." Commissioner dissents and concurrences, when they are filed alongside the NPRM later this year, will matter to any operator reading the tea leaves on what the Commission's next move will be.

Running alongside are several moving pieces that every operator and vendor should track.

At the federal level, the CFTC's own Advisory accompanying the ANPRM, styled as Division of Market Oversight guidance, recommends that DCMs listing sports event contracts engage with leagues before self-certification, adopt league integrity standards in contract terms, enter data-sharing arrangements with integrity monitors, and use official league data as settlement sources. That advisory is not binding but will be cited in any enforcement action against a DCM that skips those steps. Senate Banking, House Financial Services, and House Agriculture each have prediction-market-adjacent bills in draft, none likely to pass before the midterm recess, but each casting shadows on what the Commission will feel politically free to do.

At the state level, Arizona is enjoined. New Jersey is enjoined. Connecticut and Illinois face parallel suits by the United States. Massachusetts, Nevada, Ohio, and Montana remain active adversaries with varying procedural postures. Fifteen other states have sent letters to the CFTC urging a prohibition on sports event contracts and are expected to file jointly as commenters before April 30. Michigan, whose cease-and-desist regime is largely directed at offshore operators, has so far stayed out of the prediction-market fight in ways that suggest strategic discipline more than neutrality.

International moves are beginning to matter. The UK Financial Conduct Authority issued a discussion paper on retail event contracts in February 2026. The Singapore Monetary Authority has begun soliciting views. Neither will bind a US operator, but both shape the language the CFTC borrows when describing "manipulation susceptibility."

D. Points of Contention

Four fights drive the ANPRM record, and every commenter is picking sides on each of them.

The first is whether "gaming" in Section 5c(c)(5)(C) includes sports event contracts. Kalshi's position, the CFTC's de facto position as of the Arizona injunction, and Chairman Selig's rhetorical position is that "gaming" means casino-style wagering with an element of chance as a primary driver, not event contracts whose payouts reference measurable sporting outcomes. The state attorneys general opposing view is that sports betting is the paradigmatic case of "gaming" as Congress used the term, and that the legislative history of Dodd-Frank confirms it. The strongest argument on Kalshi's side is the Commission's repeated practice of listing event contracts on outcomes widely understood to be sports-adjacent without ever invoking 40.11. The strongest argument on the states' side is that practice is not interpretation, that the Commission has never formally defined "gaming," and that the Third Circuit's Flaherty opinion rested on a preemption theory the Supreme Court has never endorsed in this posture.

The second is whether self-certification under Regulation 40.2 is adequate in a 1,600-contracts-per-year environment. Industry commenters want the one-day review preserved with minor refinements. Public interest groups want a return to something closer to affirmative approval, and pass-through elimination of the special rule. Primev and if.market, the two platform aspirants who have filed, offer a middle option: self-certification retained but paired with structured disclosures and a formal category taxonomy. The middle option is most likely to win, because it preserves the Commission's productivity without costing it the veneer of oversight.

The third is what to do with the Section 5c(c)(5)(C) categories that are clearly bright-line prohibitions. Terrorism, assassination, and war markets are politically indefensible to defend. But operators worry about the scope of "war," given the constant drumbeat of geopolitical event contracts on everything from Taiwan tensions to the Ukraine ceasefire, and about whether a contract on a specific congressional vote referencing a war authorization is itself a war market. The ANPRM asks, at Question 19, exactly this. The answers will shape whether Kalshi's Middle East contract suite survives in its current form.

The fourth is insider trading and the concept of a "manipulation susceptibility" metric that some commenters have asked the Commission to formalize. Sports integrity groups, the NCAA, and the Thoroughbred Racing Association argue contracts referencing single-official decisions or single-player conduct are structurally unsound. Market-structure commenters respond that every event contract can be manipulated by someone and that the right response is better surveillance rather than banning categories. The Division of Market Oversight advisory leans toward the sports-integrity view. Kalshi's eventual filing will not.

E. Our Analysis

The ANPRM will not produce a final rule this year. It will produce a Notice of Proposed Rulemaking, likely in Q4 2026, and a final rule in mid-to-late 2027. Between now and then, litigation will keep moving, and the operators who spend the next sixteen days investing in a comprehensive filing will meaningfully shape what the staff drafts. The ones who free-ride on industry associations will not.

For existing operators, the practical work is four things. First, file before April 30. Silence is a choice, but it is not a strategy. Second, file in categories. A single-topic filing on manipulation susceptibility, paired with a separate filing on self-certification mechanics and a third on the scope of "gaming," is more useful to staff than a thousand-page Swiss-army comment. Third, put a senior lawyer in front of the DMO advisory and design forward on league engagement and integrity monitoring now, because the advisory will condition enforcement regardless of what the ANPRM becomes. Fourth, triage your contract book. A sportsbook-style operator listing contracts on officiating actions is visibly exposed; a Kalshi-style operator listing contracts on macro outcomes is not. Know which side of the line your book sits on and be ready to move.

For founders building something adjacent, the ANPRM is a door held open. The Commission is plainly looking for operators who can tell a credible story about self-regulation, league engagement, and integrity monitoring. That story is cheap to tell on day one. It becomes expensive to retrofit at mile ten. A prediction-market aspirant filing its DCM application in 2026 should design its contract categories, governance, and surveillance architecture to look the way the Commission has said it wants them to look. Primev and if.market have signaled they understand this. That is why their comments matter disproportionately to their size.

For vendors and service providers, the exposure is at the edges. Geolocation providers, market-data vendors, trade-surveillance platforms, and settlement-data sources will see new contractual demands flow down from DCMs trying to comply with the DMO advisory. Data licensors to sports leagues are about to become compliance intermediaries whether they want to be or not. Vendors whose products serve both DCM-regulated event markets and state-licensed sportsbooks need to think hard about whether to keep the two business lines in a single corporate wrapper or split them before a state enforcement action cross-contaminates the federally regulated side.

A founder's decision tree on this file looks like this. If your product is a sports event contract referencing an officiating decision, pivot now. If your product is a sports event contract referencing a scoreboard outcome, file a comment and build your integrity architecture. If your product is a political or macro event contract that does not touch sports, the ANPRM is mostly an opportunity and partly a risk: the opportunity is that the rulemaking could create a clear lane for you, the risk is that a Section 5c(c)(5)(C) categorical prohibition lands on your product even though sports got the news coverage. Political and war-adjacent contracts need lawyers this quarter, not next year.

The Founder's Playbook

Between now and April 30, three things. Retain CFTC-experienced outside counsel, even on an hourly rather than engagement basis, and use them to file a narrow comment focused on the two or three questions your business most cares about. Map every live contract in your book to a category the ANPRM uses and produce an internal memo describing your view of each category's risk. Stand up an integrity protocol, even a rough one, and document it for the moment when a state AG or the CFTC asks. After April 30, spend the summer watching the staff draft and the Third and Ninth Circuits set the preemption floor. Plan operationally against three scenarios: an NPRM that adopts bright-line prohibitions on sports officiating contracts, an NPRM that formalizes self-certification with disclosures, and an NPRM that does both. If your business model cannot survive any one of those scenarios, fix it now.

Watch List

Next likely developments to track. The Ninth Circuit's opinion in *KalshiEX v. Nevada Gaming Control Board*, expected by late summer. Supreme Court review of the Third Circuit's Flaherty opinion if New Jersey petitions, expected September or October. Additional state attorney-general joint comments filed between April 25 and April 30. Any Kalshi, Polymarket, or Robinhood comment letters, which on current practice will arrive within the final thirty-six hours. A possible second CFTC advisory specifically on political event contracts, which Chairman Selig hinted at in remarks at FIA Boca in March. Legislative developments from Senate Banking, which held a markup hearing on a prediction-market bill on April 9 and is expected to report out of committee before Memorial Day.

A year from now, the ANPRM will be remembered as the file that defined the scope of the prediction-market fight for the balance of the decade. Sixteen days is enough to say something useful. The operators who use it will have written themselves into the rule. The ones who wait will be written about.