The U.S. Commodity Futures Trading Commission recently issued new guidelines for the prediction markets, clearly specifying the compliance requirements for designated contract markets in listing and regulating event contracts. As the number of event contracts surged from an average of 5 per year from 2006 to 2020 to about 1600 by 2025, regulatory bodies are accelerating the construction of a long-term regulatory framework. Simply put, the prediction market is developing too fast, and regulation must keep pace. Want to know the latest developments in global prediction market regulation? Follow PASA's official website continuously.
Core Requirement: Exchanges must adhere to the baseline, with prevention of manipulation being key
The guidelines emphasize that designated contract markets, as the first line of regulatory oversight in trading activities, must strictly fulfill their statutory duties. Core Principle 3 requires exchanges to list only contracts that are not easily manipulated; Principle 4 stipulates that platforms must maintain the ability to detect market disruptions and prevent price distortions through monitoring and enforcement tools. For sports-related contracts, regulators recommend that exchanges communicate with sports governing bodies to jointly develop terms and compliance plans to reduce the risk of market manipulation.
Market Explosion: Event contracts from an average of 5 per year to 1600
Regulatory data shows that the event contract market has experienced explosive growth in recent years. The number of event contracts listed on registered exchanges soared from an average of 5 per year from 2006 to 2020, to 131 in 2021, and is expected to reach about 1600 by 2025. At the same time, the number of applications for designated contract market registration has doubled over the past year, with most applicants focusing on operating prediction markets. This growth trend has prompted the CFTC to accelerate the rule-making process.
Rule Making: 45-day comment period, focusing on sensitive areas
The CFTC has also initiated a broader rule-making process, issuing a pre-rulemaking notice to solicit public comments. The consultation document focuses on whether contracts involving terrorism, assassination, war, and other events that may contravene public interest should be completely restricted. The comment period starts on March 12 and lasts for 45 days. Chairman Michael Selig stated that this move aims to advance new rule-making based on a rational interpretation of the Commodity Exchange Act, while also reassuring the American public of the CFTC's exclusive jurisdiction over the prediction markets.
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