The US Commodity Futures Trading Commission released proposed regulations for prediction markets on Wednesday, establishing a framework for the industry. The rules were published in the federal register on Friday, initiating a 45-day public comment period.
The proposal defines standards for event contracts, a sector projected to reach $1 trillion in annualized trading volume by 2030. Chairman Michael Selig stated the guidelines will clarify which sports products are suitable for national trading. The regulations introduce a new definition of gaming while permitting the majority of existing sports-event contracts.
Regulatory Framework and Legal Context
The rules amend the "Special Rule" under Section 5c(c)(5)(C) of the Commodity Exchange Act, originally part of the 2008 Dodd-Frank Act. This provision allows the CFTC to ban contracts deemed contrary to the public interest. Current Regulation 40.11 restricts trades involving war, assassination, and terrorism.
The new guidelines specifically prohibit betting on officiating decisions and player injuries.
Stakeholders have expressed divided views regarding federal oversight. Former CFTC Chair Gary Gensler argued that regulation should remain with individual states rather than the federal government. He noted that Congress did not address sports event contracts during the passage of Dodd-Frank.