The Commodity Futures Trading Commission on June 10 released a 267-page proposal that would formally legalize nationwide sports betting on prediction markets, handing the burgeoning industry nearly everything it sought while igniting furious opposition from states, Native American tribes, and consumer advocates.
The proposed rules would establish a framework for evaluating whether event contracts involve activities Congress deemed contrary to the public interest: terrorism, assassination, war, gaming, or unlawful conduct.
Contracts tied to final scores, point differentials, tournament advancement, and player statistics would remain permissible. Election wagers would fall outside the public interest test entirely.
“The CFTC will protect the integrity of our regulated markets without standing in the way of responsible innovation,” said Chairman Michael S. Selig, a former corporate lawyer for cryptocurrency firms and prediction markets.
The Indian Gaming Association did not mince words. “It’s just the big middle finger to tribes and states,” Chairman David Bean said. IGA Executive Director Jason Giles accused the agency of corruption, saying it “blew past” federal requirements to jam the rule through.
The stakes are staggering. Monthly trading volume on platforms like Kalshi and Polymarket swelled from $2 billion in early 2025 to $23 billion by March 2026. Industry projections suggest $240 billion in annual volume by year-end.
The proposal comes just two weeks after federal prosecutors charged a Google software engineer with using nonpublic search data to place $2.7 million in bets on Polymarket contracts. The case exposed what critics have warned for years: prediction markets are uniquely vulnerable to insider trading.
More than 40 state attorneys general have gone to court arguing that their consumer protections should apply to prediction market users.
The CFTC is actively suing six states. Minnesota became the first state to outlaw prediction markets outright in May; the CFTC immediately sued to block it. The issue is expected to reach the Supreme Court.
“The CFTC doesn’t have an argument,” Giles said. “Just throw their rules in the pile of nonsense.”
Even some critics acknowledge improvements. The rules would ban discrete-action prop bets on individual plays and referee decisions—contracts that create financial incentives for manipulation.
Philanthropist John Arnold warned that the rules do not resolve the fundamental problem. “Bets on the number of points a player scores is gambling,” he wrote. “If a state wants to legalize it, that is the state’s decision.”
Bipartisan legislation is moving through Congress to close what proponents call the “prediction market loophole.” Senator Jeff Merkley said the proposal “cements the interests of prediction market companies rather than the public interest.”
The public has 45 days to comment on the proposal. The legal battles will continue—unless Congress acts first.
The public comment period closes July 27, 2026.
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