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Commodity Futures Trading Commission (CFTC) took new steps towards regulating prediction markets. It has issued new guidance to exchanges as it launches a formal process to consider new rules governing event-based contracts.
In a couple of announcements March 12your agency Market Surveillance Department published a consultation document addressing the list of event contracts.
In addition, the commission simultaneously Advanced Notice of Proposed Rulemaking (ANPRM) To seek public comment on how prediction markets should be regulated.
The move comes as event-based trading platforms are rapidly growing in popularity, prompting regulators to examine how existing derivatives rules apply to these markets.
Advisory reminds of changing regulatory obligations
The CFTC’s Division of Market Oversight said: advice It aims to help designated contract markets understand their responsibilities when listing event contracts.
The guidance emphasizes the following obligations: Commodity Exchange LawIncluding compliance with the exchange’s core principles and product shipping requirements.
It also notes that prediction markets are expanding into new areas, including contracts tied to sports-related results, which could raise additional regulatory issues.
According to the department, exchanges, acting as front-line regulators, must take proactive steps to ensure that event-driven markets develop in ways that remain compliant with federal derivatives law.
Regulator paves the way for potential new rules
Along with the advisory, the CFTC also issued an advisory. Advanced Notice of Proposed Rulemaking Gather feedback on whether new or changed regulations are needed for prediction markets.
The consultation seeks advice in a variety of areas, including:
- How do current derivative rules apply to event contracts?
- What types of contracts may be prohibited as contrary to the public interest
- Potential economic and market impacts of prediction markets
- Cost-benefit considerations for future regulations
CFTC Chairman Michael S. Selig He said the process marked the beginning of a broader regulatory review.
He noted that the initiative aims to support responsible innovation in derivatives markets and reaffirms the agency’s jurisdiction over prediction markets.
Public comments will be accepted for 45 days after the proposal is published in the Federal Register.
Prediction markets attract increasing attention from regulators
Prediction markets allow users to place contracts based on the outcomes of real-world events, from political elections to economic indicators, from sports results to cultural milestones.
Interest in the sector has increased in recent years as platforms offering event-based trading have expanded, including decentralized versions running on blockchain networks.
Regulators are increasingly examining whether such markets fall within the scope of existing derivatives laws and whether certain types of contracts may conflict with the protection of the public interest.
The CFTC said feedback from the consultations will help inform potential future rulemaking regarding prediction markets.
Final Summary
- The Commodity Futures Trading Commission has published new guidance on event contracts as it launches a consultation on potential regulations for prediction markets.
- The agency’s move signals growing interest from regulators as event-driven trading platforms expand across traditional and blockchain-based markets.
