On June 10, 2026, the Commodity Futures Trading Commission (“CFTC” or the “Commission”) published a notice of proposed rulemaking (the “NPRM”) proposing amendments to CFTC Regulation 40.11 and the addition of Appendix F to Part 40, concerning event contracts. The CFTC is proposing to specify the types of event contracts that may be deemed contrary to the public interest and therefore may not be listed for trading or accepted for clearing on or through a CFTC-registered entity, as provided in the Commodity Exchange Act of 1936, as amended (“CEA”). These proposed amendments would identify factors the CFTC would apply in making this public interest determination. In addition, the CFTC is proposing to add a definition of the term “gaming” and a rule regarding when event contracts “involve” an underlying activity. The CFTC seeks public comment on all aspects of proposed changes to Regulation 40.11 and new Appendix F.
As we have discussed previously, the prediction markets on which event contracts are traded have grown significantly. Prediction market volume exceeded $25 billion in March 2026 and the number and diversity of event contracts listed for trading on CFTC-registered designated contract markets (“DCMs”) has increased from more than 220 in 2021 to over 8,000 types of contracts traded in May 2026.
Background
Currently, a DCM or swap execution facility can list new products either through self-certification or CFTC review and approval. The CEA authorizes the CFTC to prohibit trading platforms from listing futures, options or swaps on an excluded commodity that involve terrorism, assassination, war, gaming, unlawful activity (under state or federal law) or other “similar activity” (collectively, the “Enumerated Activities”) if the CFTC determines that the contract is “contrary to the public interest” (referred to as the “Special Rule”). The CFTC adopted Rule 40.11(a) in 2011 to implement this statute and it prohibits the listing of contracts that involve, relate to, or reference the Enumerated Activities. While the preamble to the NPRM asserts that Rule 40.11 establishes “a discretionary review framework rather than a self-executing per se prohibition,” the 2011 adopting release states that the CFTC intended for Rule 40.11 “to prohibit contracts based upon the” Enumerated Activities. It also provides that the CFTC may review and prohibit contracts if it determined that they involve, relate to, or reference events that are similar to the Enumerated Activities and contrary to the public interest. In 2024, the CFTC proposed an amendment to Rule 40.11(a)(1) that would have defined “gaming” broadly (including the staking or risking of something of value on political contests, awards contests, sporting events, or related occurrences), but withdrew the proposal in 2026, stating that it would “reconsider them in light of various forms of state regulatory actions and litigation.”
The Proposed Framework
The Commission proposes to interpret the Special Rule as requiring a three-step inquiry before a determination that an event contract is prohibited.
- First, the Commission must assess whether the contract qualifies as an “event contract” (i.e., based upon an occurrence, extent of an occurrence, or contingency in an excluded commodity).
- Second, the Commission must determine whether the event contract “involves” an Enumerated Activity.
- Third, if so, the Commission may block a contract from being listed only if it undertakes a public interest analysis and affirmatively determines the event contract is contrary to the public interest.
Notably, the Special Rule does not provide that event contracts involving Enumerated Activities are per se contrary to the public interest; rather, it provides that the Commission “may determine” they are contrary.
Definition of “Involve” and “Gaming”
Key changes outlined in the NPRM are the proposed definition of when an event contract “involves” an Enumerated Activity and the term “gaming.”
- Proposed § 40.11(a)(3) states that event contracts “involve an activity if their settlement is determined by an occurrence, extent of an occurrence, or contingency in the activity.”
- Proposed § 40.11(b) defines gaming as “any activity that: (i) one or more participants typically engage in for purposes of recreation or to entertain others; (ii) is governed by rules; and (iii) includes measurable occurrences or outcomes that depend on the participants’ luck, skill, or athletic ability during the activity.”
Multi-Factor Public Interest Analysis
Rather than applying a single static test, the NPRM establishes a multi-factor framework for determining whether event contracts are contrary to the public interest. These factors include: (a) price discovery and information aggregation utility; (b) potential threats to market integrity (including manipulation susceptibility and information leakage); and (c) compliance and self-regulatory challenges arising from the prediction market’s capacity to administer the contracts.
Proposed Appendix F to Part 40 provides detailed illustrative guidance on how the Commission would apply these public interest factors, as well as the factors for determining whether event contracts involve an Enumerated Activity under § 40.11(a)(4).
Treatment of Sports Event Contracts
Likely the most commercially significant aspect of the NPRM is the Commission’s preliminary views on event contracts involving sports. The CFTC indicates that event contracts based on the aggregate outcomes of professional or collegiate sports events, including final scores, point differentials, win-loss results, tournament advancement, individual or team statistical performance, and season-long performance metrics, are unlikely to be found contrary to the public interest, provided they are based on objective and verifiable settlement criteria and listed by prediction markets that maintain appropriate surveillance, trading prohibitions, and coordination with relevant sports governing bodies. In contrast, the CFTC identifies several categories of sports-related event contracts that would likely be found contrary to the public interest:
- Player injury contracts
- Officiating outcome contracts
- Discrete-action contracts
- Physical altercation contracts (not including combat sports, such as Mixed Martial Arts, Brazilian Jujitsu, Muay Thai, Boxing, and Wrestling)
- Pre-collegiate sports events
Additionally, the Commission indicates that event contracts involving games of pure random chance (e.g., roulette) are highly likely to be found contrary to the public interest because they lack informational value.
Contracts Outside the Scope of the Special Rule
The NPRM provides helpful guidance by identifying categories of event contracts that would generally fall outside the scope of the Special Rule entirely. These include contracts based on:
- Economic indicators
- Financial indicators
- Foreign exchange rates or currencies
- Results of political elections and occurrences of political activities
- Results or outcomes of honor and award contests
Read the CFTC’s press release and the Notice of Proposed Rulemaking. Comments are due 45 days after the publication of the proposed rules in the Federal Register. A more detailed Mayer Brown Legal Update will follow.