CFTC Chairman Pushes for Federal Regulatory Framework for Prediction Markets

Commodity Futures Trading Commission (CFTC) Chairman Rostin Behnam has recently proposed a significant regulatory initiative aimed at bringing prediction markets from a legal gray area into a clear federal regulatory system. In his first major policy speech on January 29, 2026, Behnam announced the withdrawal of the 2024 proposal that sought to ban contracts related to sports and political events, and retracted the 2025 cautionary guidance for platforms, acknowledging that the guidance "inadvertently exacerbated market uncertainty." Instead, he has tasked his team with drafting a new set of "event contract rules" to provide market participants with clear and predictable operating standards, promoting the legitimate development of prediction markets in risk hedging and information aggregation, rather than simply viewing them as gambling tools.

At the same time, Behnam actively defended the CFTC's exclusive jurisdiction over prediction markets. In numerous public speeches, Axios interviews, and an op-ed in The Wall Street Journal, he emphasized that prediction markets are governed by the Commodity Exchange Act, that the federal agency has exclusive regulatory authority, and warned states against implementing local bans under the guise of "gambling." The CFTC has applied to file an amicus brief with the Ninth Circuit Court of Appeals, supporting a registered exchange against Nevada's attempt to include event contracts in the state's gambling regulatory system, foreshadowing a potential federal-state power struggle that could escalate to the Supreme Court.

While promoting legalization, Behnam also drew a red line: prediction platforms must assume "first line of defense" responsibility, strengthen compliance mechanisms, and in particular, prevent trading based on material non-public information. The U.S. Department of Justice has issued a clear warning, with the U.S. Attorney for the Southern District of New York pointing out that "betting through prediction markets does not circumvent liability for fraud," and citing cases showing that bettors have used insider information such as player injuries to manipulate sports betting, which could also apply to political, policy, or international affairs markets. The regulatory direction is shifting from "laissez-faire" to "regulation."