CFTC Moves to Rein In Prediction Markets as Industry Booms

U.S. regulators are warning prediction market platforms to consult authorities before listing event contracts as trading volumes surge and concerns about manipulation grow.

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U.S. regulators are starting to draw clearer boundaries around the fast growing world of prediction markets. The Commodity Futures Trading Commission released new guidance urging exchanges to consult regulators before listing event based contracts that could be vulnerable to manipulation or insider trading.

Prediction markets allow traders to bet on real world outcomes such as elections, economic data or sports results. The sector has exploded in popularity over the past year. Platforms like Kalshi and Polymarket reportedly saw combined monthly trading volumes reach about $18.6 billion in February, a record level.

Under the new guidance, exchanges can still introduce contracts through the industry’s self certification process. But the CFTC is encouraging platforms to flag contracts that may create incentives for abuse, including bets tied to specific athlete injuries or other narrow outcomes.

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The agency also opened a rulemaking process that could eventually shape formal regulations. Chairman Michael Selig said the goal is to establish clearer “rules of the road” while ensuring the markets remain free of manipulation and insider trading as the industry rapidly expands.