Regulation of event contracts

Full Title:
Prediction Market Act of 2026

Summary#

The bill creates new rules for “event contracts” — prediction-style derivatives based on whether things happen (for example, a weather outcome, a political result, or even whether a phrase is said). It gives the Commodity Futures Trading Commission (CFTC) power to block certain event contracts it finds contrary to the public interest, sets customer protections and anti-money-laundering rules, and creates offices and studies to oversee retail participation. It also bans Members of Congress, the President, the Vice President, and certain senior federal employees from trading event contracts.

  • Defines event contracts as listed futures, options, or swaps based on an occurrence, extent of an occurrence, or contingency (not a change in a commodity price).
  • Allows the CFTC to prevent listing/trading of event contracts tied to unlawful acts, terrorism, assassination, war, violence, gaming, or similar activities it finds contrary to the public interest.
  • Adds retail protections: limits on marketing, required disclosures, age verification (18+), segregation of certain funds, and AML (anti-money-laundering) programs for clearing organizations.
  • Creates a Retail Advocate office and Advisory Council to study and recommend consumer protections, including self-exclusion or voluntary deposit/trade limits.
  • Requires studies and reports by the CFTC and a joint CFTC–SEC study on market size, structure, blockchain use, and cross-agency issues.
  • Authorizes funding: up to $30 million per year for FY2027–2031 for CFTC work under the bill.

What it means for you#

  • Retail customers / individual traders

    • If you are under 18, you cannot be verified to trade these products under the bill’s age rules.
    • Firms must give clearer disclosures about risks and potential delays accessing funds.
    • Promotional material aimed at non-professional customers must not be misleading and must balance profit claims with risk warnings.
    • The new Retail Advocate and Advisory Council will study harms and may recommend protections such as self-exclusion or deposit/trade limits.

  • Members of Congress and senior federal officials

    • It becomes illegal for Members of Congress, the President, the Vice President, and specified senior federal employees to enter into event contracts.

  • Derivatives exchanges, swap platforms, clearing organizations, and futures commission merchants

    • Must follow new certification formats and disclosure standards when listing event contracts.
    • Clearing organizations offering event contracts to retail customers must have AML programs, age verification, and separate handling of certain customer funds.
    • Could face financial penalties for failing to follow the new format and disclosure rules (rules to be set by the CFTC).

  • Market participants and market operators

    • Some event markets could be blocked if the CFTC finds them contrary to the public interest (for example, markets that materially encourage violence).
    • New monitoring and recordkeeping rules are likely; exchanges and firms may need new systems and staff.

  • Regulators

    • The CFTC must write many implementing rules, run studies, set up the Retail Advocate office, and oversee compliance.
    • The bill also sets up an Innovation Advisory Committee to advise the CFTC on technology and market innovation.

  • Platforms using blockchain or decentralized apps

    • The joint CFTC–SEC study must look at decentralized applications offering event contracts. The bill does not itself say how such platforms will be regulated.

Expenses#

Estimated public cost: The bill authorizes up to $30,000,000 per year for each fiscal year 2027 through 2031 (a total authorization of $150,000,000), to be appropriated to the CFTC to implement the Act and related oversight.

  • The authorized funds may be used for rulemakings, enforcement, supervision, studies, establishing the Retail Advocate office and Advisory Council, and developing surveillance and data analysis tools.
  • The bill does not provide specific cost estimates for compliance by exchanges, clearing organizations, or private firms.
  • No publicly available information on administrative costs to states, market participants, or the private-sector compliance burden beyond what the bill requires.

Proponents' View#

  • The bill appears intended to protect retail investors from misleading marketing and risky, novel derivatives aimed at non-professionals.
  • It could be seen as reducing the chance that markets will encourage or profit from unlawful or violent activity by allowing the CFTC to block certain contracts.
  • The required AML and “know your customer” steps are aimed at preventing the use of event markets for money laundering or to hide identities.
  • Creating a Retail Advocate and Advisory Council may improve oversight and produce recommendations tailored to retail needs, such as self-exclusion or deposit limits.
  • Banning Members of Congress and senior officials from trading these products seeks to reduce conflicts of interest or insider trading involving event-based markets.

Opponents' View#

  • One concern is that key terms (for example, “gaming” or “other similar activity”) are broad and may leave uncertainty about what markets the CFTC may block.
  • The bill gives the CFTC substantial discretion to determine what is “contrary to the public interest,” but provides limited detail on how those decisions will be made in practice.
  • It is unclear how the rules will apply to decentralized or foreign platforms offering event contracts, and the jurisdictional boundary with the SEC is left to studies and future rulemaking.
  • Compliance requirements (standardized certifications, AML programs, fund segregation, disclosure rules) could impose significant costs on exchanges, clearing houses, and firms; the bill does not estimate those private-sector costs.
  • The procedures for financial penalties and appeals are mentioned but not fully described, leaving open questions about timelines, standards, and impact on market operators.

What is unclear: The bill requires many implementing rules and studies. How the CFTC will apply the “public interest” test, how it will treat decentralized platforms, the detailed scope of prohibited event contracts, and the expected private-sector compliance costs will depend on future rulemakings and the results of the required studies.