There is a public interest utility to the trading of event contracts by informed participants with an asymmetric information advantage; How CFTC regulations should address event contracts whose underlying events are under the control of one or several individuals; The application of the anti-manipulation prohibition in CEA section 6(c)(1) to prediction markets; and The impact of Federal Government employees or officials possessing non-public information on prediction markets. Other lawmakers are also seeking to address the issue of insider trading on prediction markets. In January 2026, Representative Ritchie Torres of New York introduced legislation that would prohibit elected officials, political appointees, executive branch employees and congressional staff from trading government or politics-related event contracts when they have or could reasonably obtain material non-public information relating to such contracts. Similarly, on March 5, 2026, Senators Jeff Merkley of Oregon and Amy Klobuchar of Minnesota introduced legislation that would prohibit the U.S. President, Vice President and members of Congress from trading event contracts and limit such activity by senior federal government officials. Soon after, on March 11, Senators Richard Blumenthal of Connecticut and Andy Kim of New Jersey introduced separate legislation that would, among other things, prohibit insider trading on event contracts. It is currently unclear whether any of these legislative proposals will move forward. However, these legislative actions and the Request, along with the CFTC’s stated aim of policing illegal and manipulative trading practices, indicate that these are issues of priority.
Conclusion
Interest in event contract markets and all-to-all trading has grown exponentially in recent years and market participants will likely welcome the Request and the forthcoming rulemaking, particularly given the CFTC’s new and markedly favorable approach to such markets. Recent CFTC staff actions, including the withdrawal of the proposed amendments to CFTC Regulation 40.11 and the amicus brief filed to the Ninth Circuit reasserting its exclusive jurisdiction over event contracts, indicate that the CFTC views itself as the primary regulator of event contracts and event contract markets, and is generally very supportive of the prediction market industry. However, the CFTC’s assertion of exclusive jurisdiction over event contracts raises questions regarding the interplay between federal and state regulatory authority. Although the cases in substance involve whether certain event contracts are subject to state gaming laws, the CFTC’s amicus brief did not address CFTC Regulation 40.11 as currently in effect, which continues to prohibit any event contract based on an excluded commodity from being listed by a DCM or cleared by a DCO if the contract involves “gaming.” The CFTC’s pre-emption argument, if accepted by the courts, would foreclose state enforcement of gaming laws against DCMs with respect to such contracts. However, these contracts could nevertheless be subject to prohibition under CFTC Regulation 40.11. The CFTC’s decision to withdraw the proposed amendments to CFTC Regulation 40.11 removes the immediate threat of a categorical ban on sports-related and election-related event contracts but leaves open the question on how exactly these contracts will be regulated.
March 2026 / Page 14
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