Comments are due 45 days after Federal Register publication. Operators, leagues, and companies with gaming-adjacent products should assess exposure and consider commenting.
Background: Market integrity and insider trading
The proposal lands amid intense focus on insider trading in prediction markets. Federal prosecutors recently charged a U.S. Army soldier with using classified information to trade on Polymarket ahead of the reported capture of former Venezuelan President Nicolas Maduro, and a Google engineer with using confidential company information to trade Google-related contracts for roughly $1.2 million in profit. The House Oversight Committee has sought information from Kalshi and Polymarket about their monitoring programs, policies, and procedures, including how they are enforcing Know Your Customer (KYC) procedures for accountholders. The CFTC’s Division of Enforcement both issued an advisory on insider trading in prediction markets in February 2026 and, in remarks at NYU Law School on March 31, 2026, named insider trading in the prediction markets among its enforcement priorities.
Industry practice is moving in parallel. On June 9, 2026, Kalshi began requiring traders to disclose their employer before trading in markets it scores as higher risk for insider activity, such as contracts on corporate earnings, product launches, and national security developments. The change followed recommendations from its independent Surveillance Audit Committee, established in February 2026, and accompanied disclosed first-quarter figures of more than 150 investigations, more than 100 blocked trades, and more than 20 law enforcement referrals.
The NPRM speaks to these concerns directly: For every covered contract, the Commission will need to weigh the risk of exploitation of material nonpublic information by insiders and whether the contract would strain the registered entity’s compliance infrastructure. The strength of an exchange’s integrity program will bear on whether its most sensitive contracts survive review.
The current framework
The current Special Rule in Section 5c(c)(5)(C) of the CEA facially prohibits registered entities from listing event contracts that involve, relate to, or reference an enumerated list of activities (activity unlawful under federal or state law, terrorism, assassination, war, gaming, or similar activity the Commission designates). In practice, the Commission has applied a discretionary framework that requires an affirmative determination that a contract is contrary to the public interest before prohibiting it—in which case it may not be listed or cleared on a CFTC-registered entity, and states are free to impose their own regulations. Existing Regulation 40.11 implements that rule.
The Commission’s prior orders, including its 2012 Nadex order and its 2023 Kalshi order, treated wagering on an event as itself gaming and, therefore, subject to the Special Rule. The CFTC has since rethought that approach, and in the NPRM, the Commission now describes its prior posture as having read the term “gaming” too broadly.
The proposed framework
If the new framework is adopted, the prior “shall not list” language will be replaced with the more permissive language that a covered contract may be blocked under the Special Rule from listing, trading, or clearing only if the Commission affirmatively finds it is an event contract, involves an enumerated activity, and is contrary to the public interest. Appendix F supplies interpretive guidance. The threshold for when the Commission “may determine” that a contract should be blocked turns on whether settlement is determined by an occurrence, the extent of an occurrence, or a contingency in the enumerated activity, a settlement-based test that replaces looser notions of association based on the activity itself.
Proposed Regulation 40.11(b)(1) defines “gaming” as an activity that participants typically engage in for recreation or to entertain others, that is governed by rules, and that includes measurable outcomes depending on participants’ luck, skill, or athletic ability during the activity. What matters is whether the settlement event occurs in a game, not whether trading on it is wagering. The Commission states that gaming includes all sports, including e-sports, but that political elections and contests, like the Nobel Prize and the Academy Awards, are not gaming because they turn on evaluative judgments rather than performance during the contest. Macroeconomic and financial indicators do not occur in games at all. Large categories of contracts therefore will fall outside the gaming prong entirely, though they remain subject to other CEA requirements.
Regulation 40.11(a)(5) directs the Commission to weigh several factors in determining whether an event contract is contrary to the public interest. Factors weighing against a finding include whether the contract provides hedging or price-basing utility consistent with Section 3 of the CEA, whether it yields meaningful information, and whether it promotes responsible innovation. Factors weighing in favor of such a finding include whether the contract poses manipulation or market-disruption risk, raises settlement integrity concerns, or creates insider information risk. The Commission will also consider whether the contract would challenge the registered entity's self-regulatory tools or compliance infrastructure. For contracts involving gaming, factors weighing against prohibition include settlement on aggregate game outcomes (final scores, point differentials, win-loss results, tournament advancement, statistical performance); settlement on objectively determinable, league-verified data; an established integrity framework (recognized governing body, monitoring function, published rules, disciplinary procedures); information-sharing arrangements with the league or integrity monitor, including the NCAA for collegiate games; and appropriate exchange surveillance and trading prohibitions.
Factors weighing in favor of prohibition cover contracts settling solely on: a game of entirely random chance; injuries to a specific athlete, where settlement turns on the occurrence, severity, or medical diagnosis of the injury; officiating calls (penalties, fouls, replay decisions, ejections, disciplinary rulings); a discrete in-game action; physical altercations subject to penalty or discipline; or games below the collegiate level. Notably, the proposal excludes contracts on the overall outcome of combat sports, such as mixed martial arts (which would include Ultimate Fighting Championship (UFC) sporting events), wrestling, and boxing, where sanctioned physical contact is described as a core and lawful element of the event.
The Commission may commence review of whether a contract is prohibited under the Special Rule only by written determination identifying the submissions, the activity implicated, the contract terms, and the factors at issue, and it must do so within 10 days of listing. A 90-day review then runs: a written statement of concerns by day 15, the entity’s response by day 30, a staff recommendation by day 60, and the entity’s reply by day 70. The Commission may request, but the proposal would not require, suspension during review. Because contracts may keep trading while under review, an adverse determination can force delisting and close-out of open positions, which is a risk to weigh at launch.
Why this matters
Operators will gain something the sector has lacked: design criteria. The factors effectively describe how to build a sports contract that survives review (aggregate outcomes, objective settlement data, league coordination, real surveillance), and the Commission expects exchanges to incur up-front documentation costs restating product lines against the framework. Build the public interest record contract by contract before a determination can arrive within 10 days of listing.
Leagues and governing bodies will gain leverage. Whether an exchange has a formal information-sharing arrangement with the league or its integrity monitor is one of the enumerated factors, giving leagues a defined role in how contracts on their competitions are structured.
Gaming, entertainment, and digital asset companies should note that the gaming definition will be cited well beyond prediction markets. The treatment of e-sports as gaming, and of elections and judged awards as outside of the definition, will surface in product classification debates before other regulators. Products near the line (skill competitions, fantasy formats, sweepstakes-adjacent offerings) should track how the final rule resolves the open questions.
Financial institutions and participants should weigh the enforcement backdrop: The CFTC takes the position that event contracts are swaps subject to the CEA’s antifraud provisions, insider trading in these markets is an enforcement priority, and the proposal makes insider risk and compliance capacity express listing factors.
Open questions and the comment window
Comments are due 45 days after Federal Register publication. Among the questions the Commission raises are:
