CFTC issues guidance to prediction markets on sports event contracts
The Commodity Futures Trading Commission has issued new guidance on how sports prediction markets operate in the US.
The regulator is also in active discussions with sports leagues regarding sports event contracts, according to Barron’s.
In its advisory sent to designated contract markets, the Commodity Futures Trading Commission warned exchanges to carefully assess sports-related contracts that could be vulnerable to manipulation.
Markets based on the actions or performance of a single player, often similar to traditional sportsbook prop bets, were singled out as particularly risky because a single individual could influence the outcome.
In a press release, the regulator said, “In light of the rapid rise in popularity of prediction markets, the division seeks to encourage growth and innovation in these markets while reminding designated contract markets of their regulatory obligations pursuant to the Commodity Exchange Act and Commission regulations.”
The new guidance is part of the regulator’s effort to construct a regulatory framework for these platforms. They have also launched a public consultation seeking feedback on issues such as insider information, investor protections, and how to address potentially sensitive markets.
The advisory comes at a time of controversy for prediction markets, as many state gambling regulatory bodies have taken legal action against prediction platforms, alleging that the contracts operators like Kalshi and Robinhood offer amount to illegal sports gambling.
Most recently, an Ohio judge ruled this week that Kalshi’s sports event contracts fell under state gambling laws.
However, prediction market operators have continued to maintain that they fall under federal jurisdiction and thus state bodies should not be allowed to intervene.
Charlotte Capewell brings her passion for storytelling and expertise in writing, researching, and the gambling industry to every article she writes. Her specialties include the US gambling industry, regulator legislation, igaming, and more.
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The Backstory
Why the CFTC is moving now
A fast-growing collision between federal derivatives oversight and state gambling law set the stage for the Commodity Futures Trading Commission’s latest advisory on sports event contracts. For more than a year, prediction platforms have expanded from politics and macro data into athlete- and team-linked markets, testing the boundaries of the Commodity Exchange Act and state sports wagering statutes. Federal regulators want innovation, but they also want to head off manipulation, insider trading and retail harm in contracts that increasingly resemble sportsbook prop bets. That tension sharpened as courts and statehouses weighed in, pulling the CFTC into a debate over what counts as a financial hedge versus a wager—and who gets to decide.
The flashpoints have piled up. Tennessee’s betting regulator ordered platforms to halt sports-linked contracts and refund customers by a January deadline, only to be blocked when a federal judge granted a temporary reprieve to Kalshi, which argued it operates under CFTC jurisdiction. The court action, described in detail in a report on the Tennessee injunction, underscored the stakes for platforms that pitch event contracts as federally regulated products rather than state-licensed bets. Meanwhile, other states stepped up scrutiny, pushing a broader question the CFTC is now trying to channel into a consistent framework: when do sports outcomes become tradable “events,” and under what safeguards?
States push back as lines blur
Michigan offered one of the clearest state-level challenges, warning that sports event contracts look like internet sports betting and must comply with the state’s Lawful Sports Betting Act. In a letter to the CFTC, the Michigan Gaming Control Board pressed the case for licensing, background checks, responsible gaming tools and integrity monitoring, and flagged risks to tax revenue if unlicensed products siphon activity from sportsbooks. The agency’s position, outlined in coverage of Michigan’s concerns, maps onto similar notices and actions in Nevada, New Jersey, New York, Ohio and elsewhere, where regulators have emphasized consumer protections embedded in betting regimes that don’t exist in commodities rules.
New York became a more aggressive test case. Kalshi sued the New York State Gaming Commission, claiming the CFTC has exclusive jurisdiction over its markets and that state enforcement improperly intrudes on federal oversight. The suit, described in a report on Kalshi’s New York lawsuit, reflects how platforms are leaning into court battles to define their products as financial instruments. The filing also landed as multiple states moved to treat sports event contracts as wagers, a trend that makes the CFTC’s guidance pivotal to any national baseline.
The disputes have produced contradictory signals. In Tennessee, Kalshi won breathing room from a federal judge; in Ohio, a state court recently found that the company’s sports products fell under state gambling law. Each ruling adds pressure on the CFTC to clarify where its jurisdiction starts and ends, what counts as permissible market design in sports-related contracts, and how to prevent the very manipulation risks spotlighted in its advisory.
Kalshi’s central role—and new alliances
Kalshi sits at the center of the fight, not only as a litigator but as a firm racing to legitimize sports event contracts through mainstream partnerships. As noted in the New York case coverage, Kalshi and Polymarket signed a multi-year deal with the NHL to access league data and rights, a move that could boost market integrity but also invites new questions about private data flows and potential informational asymmetries. The partnership amplifies the CFTC’s concern over single-player and specific-prop markets, where one person’s actions—or insider knowledge—can flip outcomes and invite manipulation.
Kalshi’s legal and commercial strategy hinges on positioning event contracts as hedging tools. That argument can resonate when markets cover macroeconomic prints or weather, but the leap to athlete performance cuts closer to the gambling line. The CFTC’s latest advisory, with its emphasis on manipulation risk and exchange obligations, attempts to draw brighter boundaries without shutting down the category. The agency has also sought public feedback on insider information and investor safeguards, a signal that any rulemaking will need to balance innovation with market integrity.
College sports emerge as a flashpoint
The debate sharpened around college athletics, where power dynamics and player protections carry extra weight. NCAA President Charlie Baker urged the CFTC to suspend markets tied to college sports until stronger safeguards exist, arguing that unregulated prediction products threaten student-athletes and competition integrity. His plea, detailed in coverage of the NCAA’s request, zeroed in on proposed markets around the transfer portal and other player-specific events. Those concerns dovetail with the CFTC’s warnings about single-player contracts and raise a practical question: can exchanges design sports event markets that meaningfully hedge real-world exposure without creating vectors for harassment, insider trading or match fixing?
The NCAA intervention also reframes jurisdictional fights as consumer protection and athlete welfare issues, not just turf battles. That framing could sway lawmakers and courts, particularly in cases where platforms market contracts as investments while offering experiences that feel like betting. If federal regulators take the lead, they will face pressure to embed athlete safeguards on par with state betting regimes, or else concede that some markets are better handled under state gambling authority.
Leadership stakes at the CFTC
Leadership uncertainty compounds the policy risk. President Donald Trump’s nominee to lead the CFTC, Brian Quintez, faced scrutiny over his board seat and equity in Kalshi. Lawmakers questioned whether his ties pose conflicts as the agency shapes rules for the very platforms at issue. As recapped in coverage of Quintez’s nomination hearing, he pledged to divest if confirmed and argued that prediction markets and crypto could bolster the U.S. economy. Still, any perception of bias could shadow future guidance and enforcement, particularly if the CFTC moves from advisories to binding rules. The nomination’s outcome will influence how aggressively the agency pursues definitions, surveillance standards and coordination with state regulators.
What’s next to watch
The CFTC’s advisory signals a two-track approach: keep the door open to innovation while outlining red lines around manipulation, insider access and consumer harm. Expect more coordination with sports leagues on data and integrity protocols and with state regulators on jurisdictional boundaries. Court dockets in New York, Tennessee and other states will continue to shape the near-term operating map for platforms like Kalshi and Polymarket, with each ruling feeding back into federal rulemaking.
The next inflection points include whether exchanges voluntarily curb or redesign single-player and collegiate markets; how the CFTC codifies surveillance, disclosure and conflict controls; and whether Congress nudges the agency toward clearer statutory authority over event contracts. With platforms also signing league partnerships and courting retail users, the stakes extend beyond compliance. The fight will determine who writes the rules of a new market at the crossroads of sports, finance and gambling—and how much protection everyday traders, athletes and fans can expect when the lines blur.
