CFTC

The Commodity Futures Trading Commission (CFTC) is an independent US federal agency created in 1974 to regulate commodity futures and options markets. In the context of prediction markets, the CFTC is crucial because event contracts can be classified as swaps or futures under US law, requiring CFTC oversight.

Kalshi became the first US prediction market to receive formal CFTC approval to operate as a Designated Contract Market (DCM) in 2020, after a lengthy regulatory process. This approval required demonstrating that its markets serve an economic purpose (hedging against real-world risks like economic data outcomes) and are not simply gambling. The CFTC had previously denied other prediction market applicants, including a well-publicized battle with PredictIt over its academic exemption.

The regulatory landscape has evolved significantly. In 2024, Kalshi and others won legal battles to expand the types of events on which contracts can be offered, including election contracts that the CFTC had previously sought to block. The CFTC continues to grapple with how to classify and regulate the rapidly growing prediction market industry, particularly as crypto-based platforms like Polymarket operate outside traditional regulatory frameworks.