Betting on war, assassinations, and terrorism could be restricted in prediction markets under a new regulatory framework proposed by the Commodity Futures Trading Commission (CFTC) on June 10.
Prediction markets have exploded in popularity in recent years as individuals place bets on everything from who will win a congressional race to how many times the Federal Reserve chairman will say “inflation.”
Combined monthly trading volumes on Kalshi and Polymarket have ballooned from $5 billion in September 2025 to $24 billion in April 2026, according to the Pew Research Center.
Officials say it is time to update rules to keep up with the immense growth of prediction markets.
Federal regulators are seeking to modernize the agency’s decades‑old “Special Rule” for event contracts, proposing clearer criteria for restricting certain markets.
The CFTC identifies bets made on prediction platforms as a type of “swaps” trading, although regulators might be stretching the definition. Swaps are agreements in which two parties exchange cash flows over time, such as interest rate or currency swaps.
According to the proposal, the CFTC would establish a formal framework for reviewing contracts tied to activities that are flagged under the Commodity Exchange Act, including assassination, terrorism, war, and “conduct that is unlawful under federal or state law.” Regulators would assess each market against a set of public interest factors to determine whether it should be allowed.
But the proposal stops short of imposing outright bans on entire categories of contracts.
“The CFTC will protect the integrity of our regulated markets without standing in the way of responsible innovation,” CFTC Chairman Michael Selig, appointed by President Donald Trump last year, said in a statement.
“This proposal gives the Commission a durable, transparent framework to identify the contracts Congress directed us to scrutinize while letting legitimate markets move forward.”
Prediction markets linked to war captured attention this year.
In April, a U.S. special forces soldier, Master Sgt. Gannon Ken Van Dyke, was federally charged over allegations that he used classified military intelligence to make highly profitable bets on the capture of Venezuelan leader Nicolás Maduro. Authorities allege that he used confidential information surrounding the ousting to win more than $400,000 on Polymarket.
Lawmakers have drafted legislation barring members of the military from trading on prediction markets in which they have relevant “nonpublic information” or “may reasonably obtain” such information.
Sports in Sight
Although these platforms have garnered attention for event trading, sports have also become popular trades on these websites.
Pew data released last month show that sports-related trades accounted for about 80 percent of Kalshi’s total trading volume since July 2024.
Major League Baseball recently signed a partnership deal with Polymarket, making it the league’s official prediction market partner.
Under the regulatory framework, the CFTC also outlined various sports-related examples that could be prohibited, including injuries, refereeing decisions, props, and physical altercations.
“The Commission believes that event contracts are more likely to be contrary to the public interest when any meaningful information about whether the underlying event will occur is unavailable to the broader market,” the proposal states.
“This includes events that are entirely random or where insight into the underlying event is highly concentrated—in a single individual, for example, or only individuals legally prohibited from transacting.”
Other sports leagues, such as the NBA and the NFL, have submitted requests asking the CFTC to ban trades on events that could be susceptible to manipulation, whether officiating or fan actions.
Prediction markets have also adversely affected sports betting tax revenues, industry experts say.
The American Gaming Association estimates that prediction markets have resulted in about $1 billion in lost tax revenue nationwide.
Bill Miller, the group’s president, said the CFTC’s efforts are “a remarkable attempt to redefine what constitutes sports betting.”
“It makes a mockery of congressional intent while going against a bipartisan coalition of 41 Attorneys General, countless legislators across the country, and the 81 [percent] of voters who recognize that the so-called ‘prediction markets’ are backdoor sportsbooks evading state and tribal law,” Miller said in a June 10 statement posted on X.
A chorus of federal and state lawmakers argues that prediction markets are no different from gambling.
In March, Sens. John Curtis (R-Utah) and Adam Schiff (D-Calif.) introduced legislation banning any event contracts that resemble sports bets.
The CFTC will now seek public comment on the proposed rulemaking as part of a 90-day review process.
