The Trump administration's proposed rule for prediction markets is drawing criticism from just about every direction. As the public comment period moves forward, lawmakers, Native American tribes, consumer groups, former regulators, and gaming organizations are all making their case to the Commodity Futures Trading Commission (CFTC) about what the agency should and shouldn't regulate.
The proposal is meant to create clearer rules around event contracts, but plenty of people believe it raises more questions than it answers. While some see it as a step toward long-needed regulatory clarity, others argue the CFTC is stepping into territory that was never meant to fall under its authority.
Here's What the Proposal Would Change
The draft rule would set limits on certain types of prediction markets while leaving the door open for many sports-related contracts. Under the proposal, markets tied to topics like crime, terrorism, assassination, and war would generally be prohibited because the CFTC believes they may not serve the public interest.
Many sports markets, however, would likely remain available if they focus on straightforward outcomes instead of more sensitive subjects. Some examples of contracts that would likely be allowed include:
- Tournament advancement
- Final scores
- Win-loss outcomes
Meanwhile, markets involving player injuries, refereeing decisions, children's sports, and similar topics would likely face restrictions.
Former Officials Aren't Convinced
Some of the most notable criticism has come from people who know the CFTC better than almost anyone. Former Senator Christopher Dodd, one of the authors of the Dodd-Frank Act, said Congress never intended for the agency to become the country's gaming regulator when it expanded the CFTC's authority over swaps.
Former CFTC Chairman Timothy Massad shared a similar view, writing that the commission has drifted away from its core mission and is trying to regulate areas that were never supposed to be under its control. Those comments add weight to an argument that's becoming more common as prediction markets continue to grow.
The State vs. Federal Debate isn't Going Away
The proposal also highlights a fight that's already playing out in courtrooms across the country. Native American tribes, casino operators, and officials from multiple states continue arguing that sports event contracts belong under state gaming laws rather than federal financial regulation. That's the same legal disagreement behind ongoing cases in states like Nevada and Michigan, where certain sports-related prediction markets remain blocked while lawsuits move through the courts.
The Trump administration has taken the opposite position, arguing that federally regulated event contracts fall under the CFTC's oversight and shouldn't be restricted by individual states. Until that question is settled, legal challenges are likely to continue.
The Trade Handle Prediction Markets Take
The comment period is doing exactly what it was designed to do: bringing every side of the debate to the table. Reading through the responses, it's clear there isn't much agreement on where prediction markets should fit or who should ultimately oversee them.
The CFTC isn't working against a deadline to release a final rule, so there is still time for changes before anything becomes official. Whatever the agency decides, this proposal is shaping up to be one of the biggest regulatory decisions the prediction markets industry has faced, and its impact will likely be felt for years to come.