Regulation

    CFTC Launches Prediction Market Rulemaking: What the 40 Questions Mean for Your Trades

    The CFTC opened formal rulemaking on prediction markets March 12, 2026. Here's what the 40 public comment questions mean for Kalshi, Polymarket, and traders — and how to comment before April 30.

    By PredictionMarkets.usSaturday, March 21, 20269 min read
    CFTC Launches Prediction Market Rulemaking: What the 40 Questions Mean for Your Trades

    The federal government just officially asked the public: how should we regulate prediction markets?

    On March 12, 2026, the U.S. Commodity Futures Trading Commission published an Advanced Notice of Proposed Rulemaking (ANPRM) — the formal opening shot in what could become the most consequential regulation in prediction market history. The agency is asking 40 specific questions about event contracts, and your comments are due by April 30, 2026.

    The timing is not subtle. Five days later, Arizona filed the first-ever criminal charges against a prediction market. Days before that, Congress introduced the BETS OFF Act to ban political contracts. The CFTC's move lands in the middle of a three-front legal and legislative war — and it's the one most likely to determine how prediction markets actually operate for the next decade.

    Here's what the rulemaking covers, why it matters to active traders, and what happens next.

    What Is the CFTC ANPRM, and Why Does It Matter?

    An Advanced Notice of Proposed Rulemaking (ANPRM) is the earliest formal step in the federal rulemaking process. It's not a rule yet — no law changes today. But it's the government's official public signal that rules are coming, and that they're taking input before writing them.

    The CFTC launched this ANPRM under Document No. 2026-05105 in the Federal Register, published March 16. Chairman Michael S. Selig framed it plainly in the press release: "This begins the process of new rulemaking grounded in a rational and coherent interpretation of the Commodity Exchange Act, while reassuring the American people that the CFTC will exercise its exclusive jurisdiction over prediction markets."

    That word — exclusive — is the whole ballgame. States like Arizona, Nevada, and Massachusetts have been filing lawsuits arguing they can regulate (or ban) prediction markets under state gambling law. The CFTC is using this rulemaking to plant a federal flag and say: this is ours.

    Why does that matter to you as a trader? Because the outcome determines:

    • Which markets stay legal and which get delisted
    • Whether platforms like Kalshi and Polymarket can legally offer sports contracts
    • How insider trading is defined and enforced
    • Whether political markets (the 2028 election, state races) survive or get banned

    The event contract listings on DCMs have surged from roughly 5 per year between 2006-2020 to over 1,600 in 2025, per the ANPRM itself. The CFTC is finally trying to build a regulatory framework that fits the industry as it actually exists today.

    The 6 Categories of Questions — Translated for Traders

    The 40 questions span six categories. Here's what each one actually means in plain English.

    1. Core Principles: How Do Existing Rules Apply?

    Questions 1-6 ask how the CFTC's existing 23 core principles for Designated Contract Markets (DCMs) fit prediction markets. These principles cover everything from market surveillance to manipulation prevention to fair access.

    The practical issue: prediction market contracts resolve on real-world events, not commodity prices. When Kalshi's "Iran Khamenei out before September 2026?" market settled at $0.69 this morning, it relied on a political judgment call, not a standardized commodity benchmark. The CFTC wants to know if existing rules are sufficient, or if event contracts need custom standards.

    One specific tension the ANPRM highlights: settlement ambiguity. Remember when Kalshi's Khamenei death carveout clause created controversy, or when "Did Cardi B perform at the Super Bowl?" ended up in dispute? The ANPRM asks how DCMs should write clearer resolution rules to prevent these situations.

    2. Public Interest: Which Markets Should Be Banned?

    Questions 7-14 tackle the core prohibition: event contracts that are "contrary to the public interest" cannot be listed or traded, per Section 5c(c)(5)(C) of the Commodity Exchange Act.

    The CFTC currently has authority to ban contracts involving terrorism, assassination, war, and gaming. But the definitions are murky. Is a prediction market on "Will US forces enter Iran?" war-related enough to ban? Is betting on a sports game "gaming" that triggers state law, or a legitimate derivative?

    Question 9 floats a particularly interesting idea: the CFTC might resurrect elements of the old "economic purpose test" that was repealed in 2000. This would require contracts to serve a legitimate price-discovery or hedging function — which political and sports markets might struggle to demonstrate.

    What this means for traders: If the CFTC adopts a strict public interest test, some of the most-traded markets today — political assassination odds, war-related contracts, individual sports player props — could get delisted from U.S. regulated exchanges. Polymarket's current top markets by total volume ($600M+ on Kevin Warsh as Fed Chair, $868M on 2028 Democratic nomination) would likely survive. The geopolitical ones are less certain.

    3. The Five Prohibited Activities: Gaming, War, Assassination, Terrorism, Unlawful Activity

    Questions 15-22 go deeper on the five specific categories of event contracts the CEA says can be prohibited. The CFTC is asking for help defining them — because none of them are currently defined.

    The most consequential question is about gaming. The word appears in the statute but has no definition in the CEA or CFTC regulations. States have been exploiting that gap to argue that sports prediction markets are "gaming" under state gambling law, making them subject to state oversight.

    If the CFTC defines "gaming" narrowly to exclude federally regulated event contracts, it effectively preempts the state lawsuits. If it defines "gaming" broadly, it could validate the state claims and create a chaotic patchwork where platforms operate in some states but not others.

    Question 22 asks whether state laws should factor into the public interest analysis. This is the most politically loaded question in the entire ANPRM.

    4. Procedural Questions: How Does Review Actually Work?

    Questions 23-28 address timing and process. The CEA gives the CFTC 90 days to review whether a contract is contrary to the public interest. But with 1,600+ new contracts listed in 2025, that review pipeline is overwhelmed.

    The ANPRM asks whether the CFTC should review categories of contracts (all sports props, all political markets) rather than individual listings — a much more scalable approach. For traders, this means the regulatory clarity you get on "sports contracts" would apply to all platforms simultaneously rather than dribbling out deal by deal.

    5. Insider Trading: The Asymmetric Information Problem

    Questions 29-32 address one of the thorniest issues in prediction markets: what happens when someone with inside information trades?

    The CFTC's own enforcement advisory (Release 9185-26) established the first-ever guidance on insider trading in prediction markets just weeks ago, after two enforcement actions — a California gubernatorial candidate who bet on their own election and a YouTube editor who traded on unreleased MrBeast content.

    Now the ANPRM goes further: should the CFTC allow insider trading in some circumstances? The argument isn't crazy — if a company executive can trade on a merger before it's announced, their trades reveal real information, potentially making the market more accurate. A government official trading on a policy decision they're about to make could make the market a better forecasting tool.

    But the ANPRM also flags a specific concern about federal employees: government officials who know upcoming policy outcomes could systematically profit from political contracts. That's a corruption risk that goes beyond traditional insider trading into constitutional territory.

    6. What Makes Event Contracts Different?

    Questions 33-40 cover the catch-all: how are event contracts legally distinct from other swaps and futures, how should costs and benefits be balanced, and how do small traders fit into the picture?

    This section also asks about blockchain-based prediction markets — a nod to Polymarket's crypto-native structure — and whether decentralized platforms have different regulatory obligations than centralized exchanges like Kalshi.

    Why Now? The Regulatory Perfect Storm

    The ANPRM didn't appear in a vacuum. March 2026 has been the most consequential month in prediction market regulatory history:

    March 12: CFTC files ANPRM, also issues companion advisory to DCMs on sports contract listing requirements. The same day, Kalshi preemptively sues Arizona in federal court seeking to block state enforcement.

    March 17: Arizona AG Kris Mayes files 20 criminal misdemeanor charges against KalshiEx LLC and Kalshi Trading LLC — the first-ever criminal prosecution of a CFTC-regulated prediction market. U.S. District Judge Michael Liburdi also denies Kalshi's temporary restraining order that same day and orders Kalshi to show cause why the federal court should not abstain under the Younger doctrine. Also: Congress introduces the BETS OFF Act.

    March 19: CFTC and MLB sign a Memorandum of Understanding on sports data integrity — a signal of exactly the kind of league partnership the agency wants prediction markets to pursue.

    The Arizona criminal case is the most immediate pressure point. U.S. District Judge Michael Liburdi has instructed Kalshi to show cause why the federal court shouldn't abstain from the case entirely in light of the criminal proceedings. A preliminary injunction hearing is set for April 3, with initial arraignment in Maricopa County Superior Court scheduled April 13.

    Meanwhile, the BETS OFF Act — introduced by Sen. Chris Murphy (D-CT) and Rep. Greg Casar (D-TX) — would ban contracts on government actions, war, assassination, and individual-control events. Geopolitical and government-action contracts represent a substantial share of trading volume on both platforms. Polymarket, which dominates geopolitical event contracts, carries the majority of that exposure.

    How to Weigh In Before April 30

    The CFTC's comment portal is open. This is real public participation in federal rulemaking — and prediction market operators, platforms, and traders all have standing to comment.

    Who should comment:

    • Traders who use prediction markets for legitimate price discovery or hedging
    • Sports bettors who've migrated to regulated prediction markets
    • Policy researchers who use election markets for forecasting
    • Anyone with a view on whether political or sports contracts serve the public interest

    How to comment: Visit the CFTC Public Comments Portal and reference the ANPRM (RIN 3038-AF65, Document 2026-05105). You don't need a lawyer. You do need to be specific about which questions you're addressing.

    Deadline: April 30, 2026 — 45 days from March 16 publication.

    Major law firms (WilmerHale, Morrison Foerster, Davis Wright Tremaine) are already advising clients to engage. If you want the industry's perspective represented, this is the moment.

    What Happens After the Comment Period?

    The ANPRM is step one of a multi-step process:

    1. ANPRM (now) — collect public input
    2. Notice of Proposed Rulemaking (NPRM) — CFTC drafts actual rule text based on comments
    3. Comment period on proposed rule — public reviews the specific language
    4. Final Rule — published in Federal Register, takes effect 30-60 days later

    Timeline estimate: if the CFTC acts with unusual speed (they currently have only one commissioner, Chairman Selig), a final rule could emerge in 12-18 months. The Arizona case and congressional activity could accelerate that. Legal experts at Davis Wright Tremaine note the unusually brief 45-day comment window suggests "a final rule is likely to come sooner rather than later."

    For traders, the interim period matters most. Platforms will continue operating under existing rules until a final rule takes effect. But the CFTC advisory issued March 12 — which requires DCMs to engage sports leagues, implement data-sharing agreements, and prove manipulation resistance — is already in effect as staff guidance.

    What This Means for Kalshi and Polymarket Users

    Both platforms are in fundamentally different legal positions:

    Kalshi (kalshi.com) is a CFTC Designated Contract Market (DCM) operating under direct federal oversight. It's the platform most exposed to the Arizona case (as a named defendant) and most invested in the CFTC preemption argument. With roughly 400,000 Arizona customers according to CEO Tarek Mansour, the state fight is existential for its user base.

    Polymarket (polymarket.com) re-entered the U.S. market through its acquisition of QCX LLC (its CFTC-registered DCM). Its offshore structure gives it different regulatory exposure — it's less directly in the crosshairs of state enforcement but carries concentrated risk in political and geopolitical contracts that the BETS OFF Act and public interest test could affect.

    Right now, Kevin Warsh as Fed Chair is at $0.99 on Kalshi ($216.96M total volume) and $0.9985 on Polymarket ($600.28M total volume) — near-perfect convergence across both platforms on this one market. That kind of cross-platform price discovery is exactly what the CFTC's rulemaking is trying to preserve and regulate simultaneously.

    Explore all active markets across both platforms at predictionmarkets.us.

    Frequently Asked Questions

    Will the CFTC rulemaking shut down prediction markets? No. The ANPRM is about regulating prediction markets, not banning them. Chairman Selig has repeatedly stated the CFTC's intent to exercise exclusive federal jurisdiction and protect these markets from state interference.

    Will political contracts like the 2028 election be banned? Unlikely under the CFTC's preferred framework. The public interest test would more likely target war, assassination, or individual-control contracts. Election markets have historically been the clearest case for legitimate price discovery.

    Does the CFTC rulemaking affect Polymarket? Yes. Even though Polymarket's international operations are separate, QCX LLC (d/b/a Polymarket US) is regulated by the CFTC for U.S. market access. Any new rules on event contract types or insider trading would apply to all DCMs.

    Can I still use Kalshi if Arizona gets its criminal case to proceed? The criminal case wouldn't shut down Kalshi nationally — it targets violations of Arizona state law. However, if Kalshi loses in federal court on the preemption argument, it could be forced to block Arizona residents from using the platform. With 400,000 Arizona users at stake, Kalshi is fighting this aggressively.

    How do I follow the April 3 federal court hearing? The preliminary injunction hearing in KalshiEx, LLC v. Jackie Jackson, et al. (D. Ariz.) is scheduled for April 3, 2026. Court filings are available on PACER.

    Conclusion

    The CFTC's prediction market rulemaking is the most significant regulatory event this industry has ever seen — more consequential than any individual lawsuit, and with a longer-lasting impact than any congressional bill that has slim odds of passing.

    If the CFTC successfully establishes exclusive federal jurisdiction over event contracts, it could resolve the state-vs-federal conflict in one stroke, clearing the path for prediction markets to operate across all 50 states without the patchwork of cease-and-desist letters and civil lawsuits. If it doesn't — if courts decide the CFTC lacks authority to preempt state gambling laws — the industry fragments by state, and trading in politically charged contracts gets significantly harder.

    The comment deadline is April 30. The preliminary injunction hearing is April 3. The arraignment is April 13. The next six weeks will shape prediction markets for years.

    Track the real-time markets that are at the center of this regulatory fight at predictionmarkets.us.

    Sources & Verification

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