Summary
- The CFTC is proposing to ban prediction markets related to events influenced by war or assassination, including the removal of foreign leaders.
- It will also restrict certain sports betting, such as wagers on player injuries and referee decisions.
- The proposal is now open for public comment for 45 days.
On Wednesday, the CFTC introduced a set of proposed rules aimed at regulating the growing prediction market industry, which includes measures that would eliminate many contentious markets available on platforms like Polymarket and Kalshi.
The proposed regulations would, for example, make it illegal to place bets on the timeline for the removal of political figures if that scenario involves war or assassination. Recently, both Kalshi and Polymarket have sought to navigate around existing bans on war-related betting by offering vague wagers on when U.S. adversaries, such as Iran's Supreme Leader Ali Khamenei and Venezuelan President Nicolas Maduro, would be “out of office.”
Such markets, which have generated significant controversy and hundreds of millions in trading volume, would be prohibited under the CFTC’s new guidelines unless they clearly state that the outcomes would only be considered valid in non-violent scenarios like “electoral defeat, resignation, constitutional removal, negotiated departure, or natural death.”
Currently, prediction markets related to U.S. conflicts abroad are available on both Polymarket and Kalshi. For instance, one active wager on Polymarket has gathered over $14 million in trades, asking who will lead Iran by the end of 2026, with the current Supreme Leader, Mojtaba Khamenei, holding a 69% likelihood of remaining in power. His father, wife, and sister were killed in Israeli-American strikes earlier this year in Tehran.
Meanwhile, Kalshi features a market with $1.6 million in trades that monitors the chances of Reza Pahlavi, the former Iranian crown prince, taking control of Iran by year-end. Pahlavi, an exiled opponent of the Iranian regime, would likely only take power if the current government fell or was overthrown.
Representatives from Polymarket and Kalshi did not respond to requests for comment from Decrypt.
The CFTC’s extensive 267-page proposal would also restrict various sports-related markets considered vulnerable to manipulation and against public interest. This includes betting on player injuries, referee rulings, specific player actions, and physical confrontations.
Overall, the CFTC maintains that prediction markets concerning sports outcomes are allowed and align with current laws governing event contracts. The proposed rulemaking states, “The Commission preliminarily believes that the record supports the conclusion that event contracts involving aggregate outcomes can be operated consistent with the public interest.”
This stance has faced significant opposition from both red and blue states, which contend through multiple federal lawsuits that sports-related prediction markets are merely unregulated gambling and should be subject to state regulation. The matter may ultimately require resolution by the U.S. Supreme Court.
The CFTC's proposed rules for prediction markets are now available for a 45-day public comment period, allowing individuals to voice their opinions directly to the agency.