On June 10, 2026, the Commodity Futures Trading Commission (CFTC) issued a notice of proposed rulemaking (NPRM) to establish greater clarity in how the CFTC will review certain event-based derivatives that are intended to be listed for trading on CFTC-registered designated contract markets (DCMs) and swap execution facilities. The proposal seeks to do so by (1) formalizing the CFTC’s review process for event contract product submissions; (2) clarifying key definitions to help specify which types of event contracts “involve” enumerated activities, including “gaming”; and (3) establishing a framework for determining whether event contracts falling into enumerated activities are contrary to the public interest.
Previously, the CFTC had published a much broader advance notice of proposed rulemaking on prediction markets, seeking industry feedback on a wide range of topics related to DCM core principles, insider trading, the regulatory classification of event contracts, and more. The NPRM is narrow and would only address the CFTC’s public interest determination process for certain event contracts listed on prediction markets.
Enumerated Activities
Under existing CFTC Regulation 40.11, for the CFTC to determine that an event contract is “contrary to the public interest,” it must first determine whether the event contract falls into an enumerated activity and is therefore subject to what is known as the “Special Rule” under Section 5c(c)(5)(C) of the Commodity Exchange Act.
The NPRM lays out a procedural framework for when the CFTC may exercise its discretion to determine that event contracts involving specified categories of activity that have historically raised regulatory concerns would be considered an enumerated activity.
Unlawful activity
Event contracts based on specific criminal acts are likely to be found contrary to the public interest. By contrast, contracts tied to generalized or aggregated data (for example, broad crime statistics) may be permissible.
Terrorism, assassination, and war
Event contracts tied to terrorism, assassination, and war are expected to raise significant public policy and national security concerns and would generally be disfavored.
Gaming / sports-related contracts
The NPRM draws distinctions within sports and similar contexts:
- Event contracts based on aggregate outcomes (such as final scores or season statistics) may be permissible (with the CFTC viewing these categories of sports event contracts as more likely to serve price discovery functions and provide meaningful information), particularly if reliable and objective settlement data is available.
- Event contracts based on discrete events or actions (such as individual plays, officiating decisions, or injuries) are more likely to be viewed as contrary to the public interest.
- Event contracts involving violence, nonprofessional participants, or outcomes driven primarily by chance are likely to face heightened scrutiny.
The NPRM also would exclude certain categories of event contracts from scrutiny under the special rule altogether, including contracts based on economic and financial indicators, election outcomes, awards, or honors
Key Definitions
Involves. The NPRM clarifies that an event contract “involves” an enumerated activity when the contract’s “settlement is determined by an occurrence, extent of an occurrence, or contingency in the activity.” This formulation is intended to capture both direct and indirect exposure to these activities.
Gaming. The NPRM would define “gaming” (one of the enumerated activities) as “any activity that: (i) one or more participants typically engage in for purposes of recreation or to entertain others; (ii) is governed by rules; and (iii) includes measurable occurrences or outcomes that depend on the participants’ luck, skill, or athletic ability during the activity.”
Importantly, the NPRM provides that sporting events would fall within the CFTC’s definition of “gaming,” meaning that event contracts based on sports outcomes may receive additional scrutiny under CFTC Regulation 40.11 because they are included in the enumerated activities.
The distinction between gaming and other forms of competition is significant. While sporting events would be considered gaming, many other types of competitions, such as elections or award determinations, would not be treated as gaming and would be outside the additional scrutiny under CFTC Regulation 40.11 altogether.
Review of Event Contracts
The NPRM would formalize the CFTC’s review process for event contract product listings that involve one of the enumerated activities set forth in CFTC Regulation 40.11, contemplating:
- A defined review period, generally up to 90 days following submission and beginning within 10 days of the event contract’s listing.
- Notice to the prediction market listing the new product of the review and the issues in question.
- An opportunity for the prediction market to respond or propose modifications to the event contract during the review process.
- Greater transparency of the reason for any determination.
- A streamlined process allowing the CFTC to consolidate the review of multiple event contracts covering the same underlying event or a substantially similar set of underlying events and issue a single determination covering all those contracts.
- A firm review period deadline; if the CFTC has not issued an order by the deadline on whether the listing is permissible, the review will be deemed concluded, allowing the event contract to be listed for trading and accepted for clearing.
- Cessation of trading and the closing of open positions for event contracts that are ultimately determined to be impermissible.
Public Interest Framework
The NPRM then proposes a factor-based approach to determine whether an event contract falling into an enumerated activity is contrary to the public interest, considering the following factors equally:
- Whether the contract has meaningful hedging or price-basing utility, producing economically useful or meaningful information or promoting responsible innovation and fair competition.
- The extent to which the contract may create risks of manipulation or market disruption, misconduct, or insider trading.
- Whether the listing venue is capable of effectively monitoring and enforcing compliance.
Implications
The NPRM reflects an effort by the CFTC to provide clearer guidance on the permissible scope of event contracts while addressing market integrity, manipulation, and public policy concerns. The NPRM also addresses (1) the importance of information markets; (2) the CFTC’s support for bringing trading in prediction markets into the United States; and (3) federal preemption and the CFTC’s authority to regulate these markets.
Market participants should expect:
- Greater predictability in the review of event contracts.
- Increased scrutiny of contracts tied to sensitive or manipulable events.
- A stronger emphasis on product design, surveillance, and compliance frameworks.
Next Steps
The CFTC is seeking comment on all aspects of the proposal, including the appropriate scope of the definition of “gaming,” the application of public interest factors, and the overall impact of the rule on innovation and market development. Comments must be received by July 27, 2026. We expect a final rule to be promulgated shortly after the comment period closes, with additional proposed rules related to prediction markets to follow.
If you have any questions, or would like additional information, please contact one of the attorneys on our Financial Services team or one of the attorneys on our Investment Funds team.
You can subscribe to future advisories and other Alston & Bird publications by completing our publications subscription form.