The Commodity Futures Trading Commission has moved to simplify compliance requirements for prediction market operators, issuing a new no-action letter that eases swap data reporting obligations for event contracts.
The guidance, issued jointly by the CFTC’s Division of Market Oversight and Division of Clearing and Risk, provides regulatory relief for designated contract markets, derivatives clearing organizations and their participants involved in fully collateralized event contracts. Under the letter, agency staff said they would not recommend enforcement actions for failures to comply with certain swap-related reporting and recordkeeping requirements tied to those contracts.
According to Decrypt, The move is significant because prediction market contracts — which allow traders to wager on binary outcomes ranging from elections to sports and economic indicators — technically qualify as “swaps” under the Commodity Exchange Act. Yet the CFTC acknowledged that these products operate more like futures contracts in practice, a distinction that has major implications for reporting requirements and broader regulatory treatment.
The agency noted that event contracts feature “highly-standardized terms, exchange-trading protocols, fungibility, and offset,” characteristics more commonly associated with futures markets than bespoke over-the-counter swaps. That classification allows exchanges and clearinghouses to use simplified futures-style reporting formats instead of the far more burdensome documentation regime generally required for swaps.
The distinction between swaps and futures has become increasingly important as prediction markets expand into mainstream finance. Traditional swaps are generally customized bilateral contracts traded privately between counterparties and subject to extensive reporting and recordkeeping obligations introduced after the 2008 financial crisis. Futures contracts, by contrast, are standardized instruments traded on regulated exchanges with centralized clearing and more streamlined reporting frameworks.
The CFTC’s no-action position effectively recognizes that event contracts, despite meeting the statutory definition of swaps because of their binary payoff structure, function operationally as exchange-traded futures products. The agency emphasized that these contracts trade on designated contract markets rather than swap execution facilities, a key rationale for the lighter-touch compliance approach.
Related: CFTC Sues New York Over Authority in Prediction Market Regulation
The new framework also creates a streamlined process for future entrants into the prediction market industry. Rather than forcing companies to seek individualized no-action relief, the CFTC said entities offering similar contracts can request identical treatment and, if approved, simply be added to an appendix attached to the existing letter.
Agency staff said the change was prompted by “numerous requests” from exchanges and clearing organizations seeking clarity regarding event contract compliance obligations. The approach is intended to “ensure uniform treatment of market participants” while eliminating the need for regulators to continually issue duplicative no-action letters for substantially similar products.
Decrypt reported that 19 beneficiaries are currently covered under the new guidance, representing both crypto-native prediction market operators and more traditional derivatives exchanges entering the sector. The breadth of the list signals increasing institutional acceptance of prediction markets as legitimate financial instruments despite continuing political controversy surrounding the platforms.
The guidance arrives amid an escalating jurisdictional battle between the CFTC and state regulators over who has authority to oversee prediction markets. Several states have argued that event contracts tied to elections, sports and other outcomes effectively constitute gambling products that violate local gaming laws.
But CFTC Chair Michael Selig has aggressively defended federal oversight of the industry, arguing that the agency possesses exclusive authority over federally regulated event contracts. According to Decrypt, Selig has threatened legal action against states attempting to regulate prediction platforms under state gambling statutes.
The letter also comes as prediction markets are facing growing scrutiny over possible insider trading by bettors. A New York Times examination of the prediction platforms published this week, for instance, found more than 80 Polymarket users have placed bets with suspicious characteristics, including 38 whose well-timed wagers have drawn little or no public attention, dating back to at least 2024.
The no-action letter nevertheless marks another step toward normalization of prediction markets within the U.S. derivatives framework. By treating event contracts more like futures than swaps for reporting purposes, the CFTC is signaling that it views these instruments as increasingly integrated into the broader regulated financial system rather than as fringe speculative products.
