On March 16, the Commodity Futures Trading Commission (CFTC) issued guidance around proposed rulemaking for prediction markets, and with three weeks remaining before the April 30 deadline for comment submissions, a flood of comments have already rolled in — with some notable exceptions.
Among other key topics, the CFTC is soliciting input on how its existing 23 statutory core principles and regulations apply to prediction markets, perhaps chief among them how to evaluate and manage market manipulation susceptibility. This topic has triggered at least eight bills from members of Congress seeking to eliminate (among other things) apparent insider trades that have occurred, for the most part, on Polymarket’s international platform, which sits outside the CFTC’s jurisdiction. Most recently, some very well-timed, lucrative trades around the Iran-U.S. ceasefire on April 7 have the appearance of insider activity and have renewed calls for efforts to curb such activity.
The CFTC is also seeking input on what types of event contracts may be prohibited as “contrary to the public interest” and what sources should inform its determination of the scope of the term “gaming.” The notice of proposed rulemaking asks specifically:
“… is gaming synonymous with, or more or less extensive than, the scope of activities covered by State and Federal gambling statutes? Are there characteristics — such as an entertainment purpose, or an element of chance — that distinguish gaming from other activities?”
This question cuts to the heart of the jurisdictional and federalism/states’ rights debate that Kalshi and its numerous legal opponents are litigating in multiple state, federal, and circuit courts across the country.
For now, let’s take stock of the commenters and their comments, beginning with a 30,000-foot view of the submissions. This analysis was assisted by PredictionMarketPulse and Claude.
- 73% are form letters (570 comments) from a More Perfect Union campaign, all filed April 3-8. More Perfect Union is a progressive nonprofit news media organization.
- 210 unique comments remain after scrubbing duplicates.
- 12 comments include document attachments (.pdf and .docx files).
- Two new platform filings are from Primev, Inc. and if.market (both April 7), the first companies building new prediction market infrastructure to weigh in.
- There are zero filings as of Thursday from major prediction players Kalshi, Polymarket, DraftKings, FanDuel, Robinhood, Coinbase, CME, or major law firms. They will likely file closer to the April 30 deadline.
The campaign by More Perfect Union, whose credo is “building power for the working class,” launched April 3 and drove the majority of comments in a 48-hour window. Before April 3, comments were exclusively unrelated individual filings. Comments generated by the campaign continue to trickle in through April 8.
The main template (500-plus exact or near-exact copies) calls on the CFTC to:
- Prohibit event contracts on military operations, acts of war, terrorism, and political assassinations. (Note: This prohibition already exists, but as written, requires the CFTC to determine that a given market is violative, and act on it — there is some ambiguity as to how the rule applies.)
- Ban contracts where outcomes can be known in advance or controlled by a small group. (Note: A prohibition on markets “readily susceptible to manipulation” already exists, but in practice, prediction markets have been allowed to list markets on events controlled by one person or a small group.)
- Strengthen surveillance and enforcement for insider trading.
- Prioritize market integrity and public welfare over industry growth.
Several minor variants exist, but all share the same core message and language. Many commenters list “More Perfect Union” or affiliated organizations in their organization field. Near-duplicates with minor personalized edits to the opening or closing are included in the “unique comments” bucket. The true number of genuinely independent comments is likely around 150 to 200.
Notable comments
Democratic U.S. Sens. Jack Reed of Rhode Island and John Hickenlooper of Colorado (filed March 16)
Two weeks after the start of Operation Epic Fury in Iran, the senators called for the prohibition of markets related to military operations, war, and terrorism. They wrote:
“These contracts are so dangerous to the national security of the United States and so offensive to U.S. values that they far outweigh any legitimate risk-management purpose. Traders with inside information that specific geopolitical events will occur, or who can directly influence such events, can easily buy event contracts. Given the high potential for insider trading, a surge in buying activity and a rapid price increase can signal that the reference event will occur. Such a pattern could tip off our adversaries that U.S. intervention is imminent.”
The senators’ filing calls for investigation into insider trading on political prediction markets and for enhanced surveillance, raising the “prohibit dangerous categories” argument that the More Perfect Union campaign later amplified.
The senators say that markets that have captured national media attention and caused public outrage took place on “offshore platform Polymarket, which is not regulated by the CFTC,” where “at least six wallets made more than $1 million in profits in just hours by betting that the U.S. or Israel would strike Iran by that date.”
They add: “event contracts tied to U.S. military operations are morally repugnant and provide no social benefit.”
Maurice (Mick) Bransfield, Kingston Chase Consulting (filed March 16)
Bransfield is a data transparency advocate who has been active on X discussing prediction market developments. He proposes requiring CFTC-regulated exchanges to provide machine-readable data (CSV/JSON) and maintain 24-month public archives of their trading data.
Stevie Cline, AI Manipulation and Upstream Scienter (filed March 16)
Cline is a self-identified legal scholar, AI governance practitioner, and practicing lawyer at a Series C AI lab. Cline suggests that AI trading agents in prediction markets creates an “intent gap.” Current CFTC enforcement requires proof of human intent to manipulate, but reinforcement learning agents can computationally discover spoofing strategies without any human designing them. Three existing legal doctrines — willful blindness, respondeat superior, and control person liability — all fail in the AI context.
Cline also proposes a graduated safe harbor for AI governance compliance, with designated contract markets (DCMs) responsible for verifying AI documentation as part of self-certification under 17 CFR § 40.2.
Charlie Baker, NCAA President (filed March 20)
Baker has been vocal about integrity concerns, not the least of which involved a submitted self-certification by Kalshi in December for markets on transfer portal entry by student-athletes. (Those markets were never posted for trading.) Baker proposes a 12-point framework for college sports event contracts and reiterates a written request from January to suspend collegiate prediction markets until the CFTC establishes “clear” rules. As in the legal sports betting domain, he argues that student-athletes face unique manipulation and harassment risks.
Ilya Beylin, Seton Hall Law professor (filed March 24)
Beylin has published extensively on prediction markets, derivatives trading, and regulation. He makes the academic argument that CEA jurisdiction has limits and that many event contracts are functionally gambling, not derivatives. Beylin questions whether the CFTC’s jurisdictional claim over all event contracts is legally sustainable.
Thomas Rooney, National Thoroughbred Racing Association (filed April 2)
Focused solely on horse racing matters, the NTRA president and CEO writes that horse racing contracts are preempted by the Interstate Horseracing Act. The NTRA argues that prediction markets on horse racing outcomes would undermine the existing pari-mutuel regulatory framework.
Guiselle Sanchez Rangel, founder of a prospective prediction market exchange in Abu Dhabi (filed April 2)
In the only international filing to date, Rangel states that the CFTC’s framework will set the global template, noting that regulators in various jurisdictions, including the UK and Singapore, are watching.
“The current jurisdictional uncertainty between federal derivatives regulation and state gambling regulation in the United States is being closely monitored by international regulators and market participants. To the extent that this uncertainty discourages the development of regulated alternatives in other jurisdictions, it may have the unintended consequence of driving market activity to unregulated, offshore platforms that offer no investor protections.”
Yicheng Yang, undergraduate researcher, University of Illinois at Urbana-Champaign (filed April 3)
A self-described academic economist triple majoring in computer science, economics, and statistics, Yang writes that empirical analysis shows prediction market prices embed risk premiums, meaning prices don’t represent pure probabilities.
“My research provides rigorous empirical support for this classification by demonstrating that event contract prices behave like derivative prices — not like probability estimates from surveys or polls.”
Two of his recommendations:
- The commission should recognize that event contract prices on CFTC-regulated DCMs are risk-adjusted derivative prices, not pure probability forecasts. Regulatory frameworks, capital requirements, and public communications should reflect this distinction.
- DCMs listing event contracts should consider disclosing to market participants that prices embed systematic risk premiums and may not be interpreted as unbiased probability estimates. This disclosure would be consistent with existing requirements for other derivative products where the relationship between traded prices and underlying economic quantities is not self-evident.
Other notable filings
David Wang (Ohio State University): Gambling framing with a tribal gaming sovereignty angle; argues CFTC regulation of prediction markets threatens indigenous gaming industry protections.
Linda Garfinkel (Food and Water Action, League of Women Voters): Organizational advocacy perspective beyond the More Perfect Union campaign.
Murat Akdeniz (Primev, Inc.): First filing from a company actively building a new prediction market platform. Primev is developing a hybrid architecture with two contract types: 5-minute crypto-price benchmarks (settled via oracle aggregation) and team-based sports outcomes.
Abhishek Dev (if.market): Protocol developer “writing to introduce the Commission to an emerging class of market infrastructure that extends beyond traditional event contracts: cash-settled conditional asset pricing markets. We believe this category of innovation merits the Commission’s consideration as it develops a regulatory framework for event-linked derivatives.”
More expected in coming days
We expect to see filings soon from:
Kalshi: The largest U.S.-based prediction market exchange, its filing will likely be the most detailed defense of the current regulatory framework.
Polymarket: It recently registered as QCX/Polymarket US but has so far launched on a limited basis. Its filing may address the offshore-to-onshore transition.
FanDuel, DraftKings: The leading U.S. sportsbook operators have both moved into the prediction market space and are likely to address the gambling/derivatives boundary.
Robinhood and Coinbase: FCMs offering prediction market access may address intermediary obligations.
CME Group: The incumbent exchange establishment, currently partnered with both FanDuel Predicts and DraftKings Predictions, may address how event contracts fit into the traditional futures infrastructure.
Coalition for Prediction Markets: The prediction market industry trade group consisting of CDNA, Coinbase, Kalshi, Robinhood and Underdog will likely file a comprehensive defense of the status quo, roughly, perhaps with some limitations around “mention” markets.
Major law firms such as Milbank LLP and Sullivan & Cromwell will likely file on behalf of platform clients.
American Gaming Association: The main lobbying arm for the brick-and-mortar casino industry is expected to argue for state gambling authority over certain contract types.
Stay tuned.
