Several weeks after reasserting its jurisdiction over Prediction Markets, US derivatives markets regulator CFTC has announced that it has published an Advanced Notice of Proposed Rulemaking, seeking public comment on the need to amend or issue new regulations concerning event contracts traded on prediction markets.

The comments provided will assist the CFTC in the formulation of a potential future agency action, including rulemaking, with respect to prediction markets.

On prediction markets, participants buy and sell contracts based on whether events stated in the contracts occur. Prediction markets function as information aggregation vehicles, because the contract prices will reflect the market participants’ aggregate beliefs regarding whether the events will occur.

Since 2021, the CFTC said it has observed a significant increase in the number of event contracts listed for trading on prediction markets, as well as in the diversity of occurrences and events underlying such contracts. The regulator has also received recent applications for DCM registration, and expressions of interest regarding DCM registration, from entities that have indicated that they are interested primarily, or exclusively, in operating prediction markets.

CFTC Chairman Michael S. Selig said,

“Today’s action is an important step in the Commission’s continued effort to promote responsible innovation in our derivatives markets. This begins the process of new rulemaking grounded in a rational and coherent interpretation of the Commodity Exchange Act, while reassuring the American people that the CFTC will exercise its exclusive jurisdiction over prediction markets.”

The notice asks questions of the public concerning the application of statutory core principles and CFTC regulations to prediction markets, the types of event contracts that may be prohibited as contrary to the public interest (such as sports related event contracts), cost-benefit considerations related to prediction markets, and other topics. The CFTC said it intends to use the information and comments received to inform potential future agency action, such as a rulemaking, with respect to prediction markets.

Comments must be in writing and received within 45 days of the notice’s publication in the Federal Register. Comments may be submitted via the CFTC’s Public Comments Portal.

The CFTC’s prediction markets notice can be seen here (pdf).