The U.S. Commodity Futures Trading Commission (CFTC) unveiled proposed rules on Wednesday that would ban prediction markets on outcomes dependent on war or assassination, including wagers on the removal of foreign political leaders. The new regulations would also prohibit certain sports prop bets such as wagers on player injuries, referee calls, and specific plays. The proposal addresses controversial markets that have proliferated on platforms like Polymarket and Kalshi, some attracting hundreds of millions of dollars in trading volume. The CFTC cited concerns about market manipulation and public interest in justifying the restrictions. The proposal now enters a 45-day public comment period during which the agency will accept feedback from the public.
CFTC Bans Prediction Markets on Political Leader Removal Tied to Violence
The proposed rules would prohibit wagers on the date by which a political leader might be removed from office when the possible path to that outcome includes war or assassination. In past months, Kalshi and Polymarket have both offered vaguely worded bets on when enemies of the U.S. government—including Iran Supreme Leader Ali Khamenei and Venezuelan president Nicolas Maduro—would be "out of office."
Those markets would be barred under the CFTC's new rules unless they specified that the markets would only resolve to yes in non-violent cases of "electoral defeat, resignation, constitutional removal, negotiated departure, or natural death."
Prediction markets wagering on the outcome of ongoing U.S. conflicts abroad currently feature on both Polymarket and Kalshi. One open Polymarket wager has attracted over $14 million worth of trades and asks who will be Iran's leader by the end of 2026. The nation's current Supreme Leader, Mojtaba Khamenei, currently leads with 69% odds. His father, wife, and sister were killed in joint Israeli-American strikes on Tehran earlier this year.
On Kalshi, a live market with $1.6 million in trading volume currently tracks the odds that Reza Pahlavi, the former crown prince of Iran, will take over the country by the end of the year. Pahlavi is an exiled enemy of the Iranian regime.
Representatives for Polymarket and Kalshi did not immediately respond to Decrypt's requests for comment.
Proposed Rules Restrict Sports Betting on Injuries and Referee Decisions
The proposed prediction market rules from the CFTC, laid out in a 267-page document, would limit certain types of sports-related markets deemed susceptible to manipulation and contrary to the public interest. Those include wagers on individual player injuries, calls made by referees, discrete player actions like specific types of plays or fouls, and physical altercations between players.
Broadly, however, the CFTC has taken the view that prediction markets on sports outcomes are permissible and consistent with existing law on event contracts.
"The Commission preliminarily believes that the record supports the conclusion that event contracts involving aggregate outcomes can be operated consistent with the public interest," the proposed rulemaking reads.
States Challenge CFTC Authority Over Sports Prediction Markets
The CFTC's position on sports prediction markets has attracted pushback from red and blue states alike. States have argued in a suite of ongoing federal lawsuits that sports-related prediction markets are just unregulated betting by another name and should be regulated at the state level. The issue is likely to ultimately be resolved by the U.S. Supreme Court.
CFTC Opens 45-Day Public Comment Period on Proposed Rules
The CFTC's proposed prediction market rules now enter a 45-day comment period in which anyone can share their thoughts on the proposal with the agency directly.
FAQ
What did the CFTC propose on Wednesday regarding prediction markets?
The CFTC proposed rules that would ban prediction markets on outcomes dependent on war or assassination, including wagers on the removal of foreign political leaders. The rules would also prohibit certain sports prop bets such as wagers on player injuries, referee calls, and specific plays.
How much trading volume have controversial political prediction markets attracted on Polymarket and Kalshi?
One Polymarket wager on Iran's leadership by the end of 2026 has attracted over $14 million worth of trades. A Kalshi market tracking the odds that Reza Pahlavi will take over Iran by the end of the year has $1.6 million in trading volume.
What is the next step for the CFTC's proposed prediction market rules?
The proposal enters a 45-day public comment period in which anyone can share their thoughts on the proposal with the agency directly.
