The Commodity Futures Trading Commission's Division of Market Oversight (DMO) has issued a new advisory urging designated contract markets to adhere to required self-certification procedures for event contract series.

Under the CFTC's self-certification framework, exchanges may list new contracts without prior agency approval by attesting that they comply with the Commodity Exchange Act and relevant regulations. While this process was designed to promote market efficiency and product innovation, the DMO now warns that its misuse has outpaced the agency's ability to conduct meaningful oversight.

The guidance warns against the increasingly common practice of filing broad, generic submissions that bundle multiple unrelated event contracts. According to the DMO, such "boilerplate" filings make it difficult for regulators to assess whether each individual contract complies with the Commodity Exchange Act and CFTC regulations.

The commission observed that companies have recently been grouping entirely different types of bets into a single application. This practice, the agency said, prevents proper verification of contract compliance and the accuracy of submitted data. The advisory cited the 2026 World Cup as an example: all matches within a single tournament may be bundled into one filing, but separate tournaments must be submitted individually because each is governed by distinct rules.

The advisory aligns with the CFTC's broader proposal issued in June, which established a formal framework for reviewing event contracts that may serve the public interest. It also arrives as prediction markets face intensifying regulatory scrutiny amid rising trading volumes and growing participation from both retail and institutional investors. Platforms such as Polymarket reported billions in trading volume during the 2024 U.S. election cycle, bringing the sector to the attention of lawmakers, state attorneys general, and financial regulators debating whether these products are commodities, securities, or gambling.

Earlier CFTC Guidance Encouraged Sports Industry Collaboration

In March, the CFTC published its first clear set of guidelines for betting on real-world events such as elections and sports. Regulators recommended that platforms coordinate with sports authorities, comply with integrity standards, establish data-sharing systems, and rely exclusively on official league data.

The advisory noted: "DMO staff notes heightened potential for manipulation or price distortion in sports contracts that resolve based on injuries to individual participants, unsportsmanlike conduct, physical altercations, or the actions of a single individual or small group such as officiating decisions."

Liz Davis, partner at Davis Wright Tremaine and former chief trial attorney in the CFTC Division of Enforcement, said at the time that the commission was pushing for greater cooperation between itself and sports leagues or sporting authorities regarding sports event contract agreements. She emphasized that sports organizations should be open to sharing information and using league data.

The latest advisory asks contract markets to comply with required self-certification procedures. The DMO argued that proper procedures would help platforms detect individuals attempting to cheat or manipulate scores, while also streamlining the verification process. Over the past 18 months, the agency has seen a dramatic rise in self-certified contracts, resulting in exponentially more versions of underlying contracts on regulated exchanges.

CFTC Proposes New Framework for Prediction Markets

On Wednesday, the commission introduced draft regulations designed to strengthen federal oversight of prediction markets and address rising fraud risks.

The CFTC's draft establishes specific standards for sports contracts but excludes political and election-based markets from the most stringent oversight categories. In a statement, Chair Michael Selig asserted that the proposed framework balances strict oversight with market-driven innovation.

The agency preliminarily classifies both sporting events and games of chance as forms of gaming. However, it determined that sports wagering is generally not contrary to the public interest, while betting on games of pure luck likely is. The draft refers to election bets as "contests" rather than gambling, implying that such activities do not fall under the specific categories requiring the CFTC to conduct a 90-day review of event contracts.

The proposed framework arrives amid significant legal pushback from several U.S. states and Native American tribes seeking to ban sports-focused contracts. The tension reflects a broader jurisdictional question: state gambling regulators and tribal gaming authorities assert that sports event contracts fall under their authority, while federally designated contract markets argue these products are derivatives subject to CFTC jurisdiction. A court recently granted Washington state's motion for a preliminary injunction halting Kalshi from listing its event contracts in the state. Massachusetts, Michigan, Nevada, and New York have also obtained court rulings restricting Kalshi's activities.

Although prediction market platforms maintain that they proactively self-report bad actors, insider trading incidents have increased. Recently, Gannon Ken Van Dyke, a U.S. Special Forces soldier, allegedly collected more than $400,000 (£296,000) after placing a wager on the removal of Venezuelan President Nicolás Maduro. Authorities also accused an Italian Google software engineer of using insider information to trade.

The CFTC, Kalshi, and Polymarket have all affirmed their commitment to combating insider trading as the proposed framework enters a 45-day public comment window. The eventual rules could reshape how prediction market operators structure their products, disclose risks, and coordinate with regulators across multiple jurisdictions.