The Commodity Futures Trading Commission is in the middle of rewriting the rulebook that decides which prediction market contracts can legally trade in the United States, and the public comment window on that rewrite closed July 27. For an industry that raised a combined $25 billion in trading volume across CFTC-registered markets in 2025, according to the agency’s own proposal, that rulebook determines which exchanges get to exist at all.
What Is the CFTC’s Proposed Rule on Prediction Markets?
On June 12, the CFTC published a proposed rule that would rewrite how it decides whether a prediction market contract is “contrary to the public interest,” the legal standard that lets the agency block a contract from trading. The proposal does two things at once. It defines, for the first time in CFTC rulemaking, what counts as “gaming,” one of the categories of contract the agency can prohibit. And it lays out the specific factors the Commission will weigh before blocking a contract, rather than deciding case by case with no public standard. The agency’s stated goal is to give prediction markets a clear test to run their contracts against before they list them, instead of finding out after the fact that a contract violates a standard nobody had defined.
The timing is not incidental. The proposal follows what the CFTC itself describes as a sharp increase in applications for designated contract market status from firms that exist primarily, or only, to run prediction markets, a wave the agency’s earlier March 2026 advance notice was written to get ahead of. That March notice alone drew roughly 3,500 public comments.
What Counts as a Designated Contract Market Under CFTC Rules?
For anyone tracking CFTC prediction markets specifically, the DCM designation is the starting point. A designated contract market, or DCM, is an exchange the CFTC has approved to list futures contracts, options, and swaps for public trading. Under the Commodity Exchange Act, any prediction market offering contracts structured as futures or swaps has to register as a DCM and follow the CFTC’s listing and surveillance rules, the same basic framework that governs traditional commodity and financial futures exchanges. Kalshi operates as a DCM. So does every other CFTC-regulated prediction market currently listing event contracts to the public.
That single requirement is why the DCM application count matters more than any single company’s news. Each new DCM is a separate, fully regulated venue, not a feature bolted onto an existing exchange. The CFTC’s own proposal frames the current wave of applications as unusual specifically because so many applicants want DCM status for the sole purpose of running prediction markets, rather than as one product line inside a broader commodities exchange.
How Does This Prediction Market Regulation Affect Institutional Capital?
Regulatory clarity cuts a different way for institutional traders than it does for retail bettors. An individual placing a bet cares whether a specific contract is allowed to list. A market maker deciding whether to commit capital across five or seven exchanges cares whether the rules governing all of them are stable and predictable enough to build a business on. The CFTC’s proposal is explicitly trying to supply that predictability: rather than blocking contracts after they’ve already started trading, as happened when the agency prohibited Kalshi’s 2023 election contracts only to have a federal court vacate that order the following year, the new framework tells prediction markets which factors will get a contract blocked before they list it.
That distinction matters for infrastructure providers as much as for exchanges. EDGE Markets, a fintech building banking and payment infrastructure for gaming and prediction market participants, has said it is pursuing Introducing Broker and Futures Commission Merchant registrations with the National Futures Association so its institutional product, EDGE Pro, can custody and clear funds for market makers directly. Those registrations remain pending, not approved, and building toward them inside a regulatory framework that is itself still being finalized is a different undertaking than building toward a settled rulebook. A clearer, faster-to-navigate CFTC standard makes that path more predictable for every firm pursuing it, not just EDGE.
Why Are Sports Leagues Formalizing Integrity Agreements Now?
The rulemaking is not the only sign that oversight of this market is becoming more formal. On May 21, the National Hockey League signed a memorandum of understanding with the CFTC to share information and coordinate on integrity issues tied to event contracts referencing NHL games, following a similar agreement the CFTC signed with Major League Baseball in March. Neither agreement grants the CFTC new enforcement power. Both formalize a data-sharing relationship the agency can draw on when investigating suspicious trading tied to a specific sport, the same kind of relationship the proposed rule is trying to build at the contract-design level rather than the league level.
Taken together, a rulemaking that defines what the CFTC will and won’t allow, plus a growing set of formal integrity relationships with the leagues whose games get traded on, point in the same direction: a market that ran for years on informal norms and after-the-fact enforcement is being asked to operate on written standards instead. That shift affects exchanges first, but it reaches every firm, including payment and settlement providers, built to operate inside CFTC-regulated markets rather than around them.
Sources – CFTC, “Prediction Markets; Public Interest Determinations”, Federal Register, June 12, 2026 – CFTC, “CFTC and National Hockey League Sign MOU Related to Integrity in Professional Hockey”, May 21, 2026 – AlleyWatch, “EDGE Markets Raises $29.2M to Solve the Capital Constraint Blocking Institutional Traders in the Prediction Markets”, June 2026
