Proposed Prediction Markets Rule Change Could Impact Event Contracts

The Commodity Futures Trading Commission (CFTC) introduced a 267-page proposal on Wednesday that could reshape what prediction markets such as Kalshi and Polymarket are allowed to offer. The proposal targets event contracts deemed contrary to the public interest, including sports-related propositions.

While some markets would remain unaffected, the target restrictions would come on props that are subject to insider trading, manipulation, and could damage the integrity of the sport. Key points that were flagged on the proposal include: Officiating, Injury, and altercation contracts.

Officiating contracts

The CFTC warns that traders could come in contact with referees and officials, which could lead to insider knowledge as well as tampering.

“The Commission preliminarily finds that the risk of inappropriate contact between market participants and officiating personnel and the risk of selective officiating raises public interest concerns because that risk threatens the integrity of the game, which is, in turn, a matter of public interest.”

Player injury contracts

Several prediction markets currently offer selection on the severity, diagnosis, occurrence, and duration of sports-related injuries. In the proposal, it hints at players willing to risk their health or forge inaccurate injury diagnostics.

“Such event contracts create perverse financial incentives that could encourage or facilitate physical harm to athletes. The settlement of such event contracts would likely depend on medical diagnoses, which raises public interest concerns about the confidentiality of medical information and the potential for such sensitive information to be leaked or exploited by insiders.”

Physical altercation contracts

Whether it’s the NBA, NFL, or MLB, markets are being offered on players getting into altercations, getting technical fouls, or being ejected from games. The concern is that players will intentionally do so based on what the market is saying.

“The Commission preliminarily believes that event contracts that settle solely by reference to physical altercations, fights, or conduct between players or participants in the game that are subject to penalty, ejection, or disciplinary action raise public interest concerns. Such event contracts could create a direct financial incentive for both athletes and market participants to encourage, facilitate, or provoke such conduct.”

Leagues getting involved

Both the NFL and NBA have taken steps to restrict certain prop markets from being offered. The NBA sent a letter to the CFTC with the intention of swaying them to enforce stricter regulations on prediction markets as a whole while also looking to protect the integrity of the league.

The NFL went directly to Kalshi and Polymarket, asking them to refrain from offering event contracts on susceptible topics, including injuries, broadcast booth phrases, the NFL Draft, and others.

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