On June 10, the CFTC released a proposed rulemaking to govern the listing of event contracts (i.e., prediction products) on a set of subjects Congress identified as deserving of special scrutiny.[1] These subjects are, as specified in Commodity Exchange Act (CEA) Section 5c(c)(5)(C) (the “Concerning Event Contract Section”) contracts that involve war, terrorism, assassination, activity unlawful under state or federal law, gaming and certain similar subjects (the “Enumerated Subjects”).[2] The Concerning Event Contract Section provides the CFTC with authority to prohibit event contracts on Enumerated Subjects to the extent that such contracts are contrary to the public interest. The statutory language in the Concerning Event Contract Section singles out contracts on concerning activities but does not itself prohibit those contracts, instead leaving the matter to the CFTC to consider in accordance with public interest.
The proposed rulemaking does not take a step back and consider what is best for derivatives markets. Rather, the proposal is a pragmatic exercise meant to further the CFTC’s litigation concerning contracts on sporting events and the philosophical views of its current leadership. The CFTC largely chose this approach when it permitted contracts on NFL games and other sporting events at the outset of the second Trump administration. These markets have flourished, and now it is hard to put the toothpaste back in the tube as industry expectations have been established around the provision of sports gambling through derivatives exchanges. What we are seeing is rulemaking catching up with the policy the CFTC instituted through non-enforcement.
As background, there are differing views on the procedural requirements of the Concerning Event Contract Section and CFTC Rule 40.11, which was promulgated under that section. CFTC Rule 40.11 represents the Obama-era effort of the CFTC to categorically prohibit contracts on Enumerated Subjects.[3] In the past, the CFTC viewed the Concerning Event Contract section as allowing for ex ante prohibition of event contracts on the Enumerated Subjects. The current Rule 40.11 prohibits exchanges from listing contracts on Enumerated Subjects. But under the current Trump administration, it is no longer enforced. This lapse led to and relates to the litigation the CFTC is involved in with states and tribes regarding its exclusive jurisdiction over contracts traded on derivatives exchanges. The CFTC has traditionally had exclusive jurisdiction over contracts traded on its exchanges—a congressional choice that in part responds to over a century of efforts to regulate such contracts as gambling under state law. In the past, however, the CFTC has not permitted overt gambling on its exchanges as to matters such as contracts that settle on the outcomes of sporting events.[4] When the CFTC allowed exchanges to list sports wagering contracts, state gambling commissions and Native American tribes sued the exchanges. The CFTC intervened in these suits, arguing that only the CEA governs contracts on derivatives exchanges and seeking to stop state and Native American efforts.[5]
Judges considering state claims of concurrent jurisdiction over derivatives exchanges to the extent they host sports wagering have considered Rule 40.11. The non-enforcement of that rule has been seen as an argument for concurrent state regulation. In the proposal, the CFTC seeks to reframe its non-enforcement. The proposal includes evidence that it was not carefully prepared, including in that it (a) does not respond to comments on the preceding Advanced Notice of Proposed Rulemaking that were critical of hosting sports gambling on derivatives exchanges, and (b) includes superficial errors. The proposal was developed quickly, likely to provide a response to the litigation spread across more than a dozen federal and state courts.
From the time Rule 40.11 passed, critics were skeptical that it was consistent with the language of the Concerning Event Contract Section. CFTC Commissioner Brian Quintenz offered a leading and thoughtful criticism. He argued that the Concerning Event Contract Section requires the CFTC to consider the validity of a contract only after it has been filed. The proposed rulemaking adopts this position, providing an excuse for the CFTC’s non-enforcement of Rule 40.11 under the second Trump administration.
The framework the CFTC proposes for reviewing filed event contracts takes a similarly strategic position. At the highest level, the framework involves three steps. First, there is a determination of whether the contract is an event contract. Second, there is a determination of whether the event contract involves one of the subjects listed in Section 5c(c)(5)(C). And third, there is a determination of whether the covered event contract is contrary to the public interest. All three questions have to be answered in the affirmative for a contract to be prohibited after being listed.
Procedurally, the proposal gives the CFTC a truncated period to undertake its review. The statute provides the CFTC with a 90-day review period that can start at any point. The proposed rulemaking gives the CFTC 10 days from contract filing to initiate a review based on a Commission level (rather than staff level) determination. After review is initiated, the CFTC has only 15 days to provide the exchange with a relatively detailed, written objection. And the remaining 75 days of the 90-day period are similarly carved up to reduce the opportunity for the CFTC to muster objections to filings. The truncated period reduces the CFTC’s ability to cogently challenge event contract filings. Contracts that are not challenged or are not successfully challenged are viewed as copacetic and become precedent for authorizing similar contracts.
Substantively, the review of contracts is based on factors that the CFTC has chosen strategically. In some cases (e.g., war, terrorism, assassination), the CFTC considers broader social interests that are nowhere specified in the CEA as I believe an agency should when considering the public interest. For example, the CFTC considers national security and moral hazard when assessing contracts on war, assassination and terrorism. It also considers moral hazard when considering contracts that violate state law. Similarly, when considering event contracts on youth sports and player injuries it considers privacy interests related to minors and health information. The CFTC demonstrates it knows how to assure that innovation is “responsible innovation” and consider the implications of contracts beyond any statutory rubric. However, in relation to sports contracts, the CFTC doesn’t consider the social implications of permitting gambling through derivatives platforms. Indeed, the CFTC does not acknowledge that gambling is socially harmful and that allowing gambling on derivatives markets degrades the stature of those markets and the CFTC.[6]
In considering contracts on sporting events in the proposal, the CFTC focuses on protecting market integrity rather than on the social implications of the market. Laudably, the CFTC considers the susceptibility of contracts to manipulation, insider trading and other misconduct and is attentive to the resources of exchanges in policing for misconduct. However, in my view, this does not substitute for attention to the social utility of the contracts. Moreover, some of the discussion is based on the CFTC’s speculation about the character of information available as to various events (such as outcomes of sports matches and individual player performance), speculation as to the value of information about those outcomes, and speculation about the hedging value of these contracts. This speculation is baseless, and in many cases likely wrong. Along the way to its desired outcome, the CFTC has to make some uncomfortable distinctions, such as between contracts on artistic ice-skating competitions and contracts on the outcomes of award shows.
Importantly, the proposal leaves some competitive breathing room for the sports books, and this may be a recognition of the political economy of the contest between exchanges and sports books the CFTC waded into. Wagers on an individual player’s actions during a match are disfavored under the proposing release. As a result, only sports books would probably be able to offer this lucrative and popular diversion (e.g., whether a penalty kick is made or a pitcher strikes out a specific hitter). It remains to be seen how the competition between sports books and other traditional gambling venues, on the one hand, and derivatives exchanges, on the other hand, develops. It will be interesting to compare sports wagering volumes, revenues, and profits captured by traditional venues and prediction markets over time. While immunity from state gambling regulation, taxes and licensing fees provides a powerful leg up to derivatives exchanges, this limitation on products they can offer leaves an important competitive advantage to sports books.
An implication of the strategy the CFTC chose in the proposal is worth addressing. The current CFTC, again, is vociferously arguing against the validity of existing Rule 40.11 and defending the agency’s non-enforcement record. The rule, as it would be amended by the proposal, allows the listing of all event contracts subject only to ex post CFTC review. This means, for example, that prediction markets are free to list contracts on whether Emmanuel Macron would be assassinated or someone will set off a bomb in Lincoln Center. Only if a post-listing CFTC review process finds that the contract is contrary to public interest would the contract be banned. However, the CFTC has telegraphed in the release that it is highly likely that such event contracts would be found contrary to public interest. Although the CFTC is seeking to change rules to enable such distasteful contracts to be listed, such contracts are as a practical matter unlikely to survive for very long. This change is the price of the Trump CFTC vindicating its reading of the Concerning Event Contract Section as permitting only ex post review. My strong preference is to continue the practice of banning certain contracts on Enumerated Subjects ex ante and I believe even a post-Loper Bright CFTC has authority to do so.
ENDNOTES
[1] Prediction Markets; Public Interest Determinations, 91 Fed. Reg. 35806 (June 12, 2026).
[2] Specifically, the Concerning Event Contract Section provides in relevant part: “(C)Special rule for review and approval of event contracts and swaps contracts:
(i)Event contracts. In connection with the listing of . . . contracts . . . by a [derivatives exchange] the Commission may determine that such . . . contracts . . . are contrary to the public interest if the . . . contracts. . . involve— (I) activity that is unlawful under any Federal or State law; (II) terrorism; (III) assassination; (IV) war; (V) gaming; or (VI) other similar activity determined by the Commission, by rule or regulation, to be contrary to the public interest.
(ii)Prohibition. No . . . contract . . . determined by the Commission to be contrary to the public interest under clause (i) may be listed or made available for clearing or trading on or through a registered entity. . . .
(iv)Deadline. The Commission shall take final action under clauses (i) and (ii) in not later than 90 days from the commencement of its review unless the party seeking to offer the contract or swap agrees to an extension of this time limitation.”
[3] Provisions Common to Registered Entities, 76 Fed. Reg. 44776 (July 27, 2011).
[4] Ilya Beylin, Regulation of Prediction Markets in the U.S., Commodity Insights Digest (Summer 2026).
[5] For partial discussions of the litigation, see John T. Holden, Matthew C. Turk & Marc Edelman, Regulating Sports Prediction Markets, U. Ill. L. Rev. (forthcoming 2026); Melinda Roth, Prediction Markets: Creating a New Asset Class from Ballots to Box Scores, Connecticut L. Rev. (forthcoming 2026).
[6] The proposal exhibits a refusal to consider broader social interests in other places, such as in welcoming betting on the outcomes of court cases (which are necessarily driven by a concentrated group of actors and involve concerns with the independence of judges and juries, rule of law, and manipulation). Fomenting wagers on court outcomes may spur the legal community to turn to Congress for a fix. It also has interesting interactions with litigation financing.
Ilya Beylin is an associate professor at Seton Hall University School of Law.