Prediction markets in the United States operate under the Commodity Exchange Act (CEA), which gives the CFTC exclusive jurisdiction over event-contract derivatives. That jurisdiction comes with a hard constraint: Congress permanently banned five categories of contracts in CEA §5c(c)(5)(C) — and no exchange, platform, or regulator can override that statutory text. A separate public interest test governs everything else.
In June 2026, the CFTC issued a Notice of Proposed Rulemaking (NPRM) to clarify how it applies that public interest test, with particular focus on sports-event contracts. Understanding the distinction between the always-banned categories and the proposed sports scrutiny is critical for traders, exchanges, and the public comment process (deadline: July 27, 2026).
CEA §5c(c)(5)(C) permanently prohibits five categories. No CFTC chairman, no DCM rule change, and no company legal team can list these — they require an act of Congress to lift.
All other event contracts go through a three-step sequential inquiry. A contract can survive this test and be listed legally. The CFTC's 2026 NPRM proposes new factors for how that test is applied to sports contracts.
The test is not automatic rejection — many sports contracts may still pass, depending on structure, governing-body coordination, and the factors the NPRM outlines.
These five categories are permanently off-limits. A CFTC-designated contract market (DCM) that lists any of these contracts — even inadvertently — is in violation of the CEA regardless of how the contract is structured or what public interest arguments it might otherwise satisfy.
Contracts whose underlying activity is a game of chance, skill, or athletic ability governed by rules — including casino games, poker, chess, and sports events where the contract constitutes wagering rather than price discovery.
Any contract based on the occurrence or extent of a terrorist act, including attacks on infrastructure, mass-casualty events, or acts designated as terrorism under federal or state law.
Contracts contingent on the assassination of a public official or private individual — regardless of jurisdiction or the identity of the target.
Contracts based on the initiation, duration, or outcome of armed conflict between states or non-state actors, including declarations of war or military invasions.
Contracts whose underlying activity is illegal under federal or state law, including drug trafficking, money laundering, or any activity that would make the contract itself a vehicle for evading the law.
For contracts that are not in the always-banned categories, the CFTC applies a sequential three-step analysis. A contract must pass all three steps to be listed.
Assess whether the agreements, contracts, transactions, or swaps qualify as event contracts (based upon an occurrence, extent of an occurrence, or contingency).
Determine whether the event contracts involve an activity enumerated in the Special Rule (gaming, terrorism, assassination, war, or unlawful activity) or similar activity.
If they involve such activity, undertake a public interest analysis and determine whether the event contract is affirmatively against the public interest.
Source: Federal Register 91 FR 35806
The NPRM does not automatically ban all sports-event contracts — that would require Congress to remove gaming from the Special Rule. Instead, it proposes specific factors the CFTC would weigh when applying the public interest test to sports contracts. Some categories are flagged as likely contrary to the public interest; others carry favorable factors that weigh toward approval.
The sports scrutiny in the 2026 NPRM does not touch political, financial, economic, geopolitical, or science-policy contracts. These categories have consistently passed the three-step public interest inquiry, and the NPRM's proposed factors do not introduce new barriers for them.
Check your open sports positions
If you hold contracts on player injuries, officiating decisions, or in-game actions, monitor the CFTC rulemaking. Delisted markets are typically voided with original stakes returned, but confirm your platform's rulebook.
Separate sports contracts from everything else
Financial, political, and economic contracts are not affected by the NPRM's sports scrutiny. If your strategy focuses on Fed rate decisions, election outcomes, or GDP prints, the proposed rules do not create new risk.
Comment before July 27
The NPRM is in its public comment period. Traders, researchers, and industry participants can file formal written comments that become part of the rulemaking record.
Primary Source
Prediction Markets; Public Interest Determinations
CFTC Notice of Proposed Rulemaking · RIN 3038-AF65 · 91 FR 35806 · Comment deadline: 2026-07-27
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