particularly sports-related event contracts. A few weeks prior, on February 25, 2026, the CFTC Division of Enforcement (“DOE”) had issued its own advisory (the “DOE Advisory”), outlining that event contracts traded on a DCM are subject to certain prohibited trading practices, which are policed both by the DCM and by the CFTC. 3 Over the last two years, prediction markets have been the focus of much regulatory attention, and there has been a significant increase in the number and diversity of event contracts listed for trading on prediction markets. Several DCMs that exclusively offer event contracts have recently launched, in some cases permitting retail participants 4 to trade directly on their platforms alongside institutional participants without the broker intermediation typically present in securities markets. This momentum sets the stage for the CFTC to provide critical market guidance in a rapidly evolving regulatory space through the Request and DMO Advisory. 5 This OnPoint summarizes the regulatory framework applicable to event contracts, describes the mechanics of fully-collateralized trading and clearing models, and discusses certain relevant CFTC regulatory actions and proposals.
This OnPoint is structured as follows:
We begin with a background discussion on event contracts and prediction markets generally, as well as the regulatory structure that underpins them.
Next, we summarize the Request and the DMO Advisory.
We then address who may access these markets and under what conditions, and the implications of such access restrictions for pooled vehicles. We also consider two issues that have been controversial in recent months: the trading of event contracts on political and sporting events and the participation of “insiders” with material non-public information in event contracts. Finally, we summarize the ongoing litigation around whether event contracts and the prediction markets that offer them may fall afoul of state gambling laws.
Background on Event Contracts
Although the term “event contract” is not defined in the CEA or in the CFTC’s regulations, the CFTC has stated that “event contracts are generally understood to be a type of derivative contract, typically with a binary payoff structure, based on the outcome of an underlying occurrence or
3 CFTC Staff Advisory on Enforcement Authority over Event Contracts (Feb. 25, 2026), available at https://www.cftc.gov/media/13351/Enf_AdvisoryKalshi022526/download. 4 As used in this OnPoint, “retail participants” means individuals other than “eligible contract participants.” Eligible contract participants include investment companies subject to regulation under the 1940 Act and certain commodity pools and entities with over $10 million in assets. An individual is generally not an eligible contract participant unless the individual has more than $10 million invested on a discretionary basis.
5 A list of recent CFTC regulatory relief is appended to this OnPoint in Appendix A.
March 2026 / Page 3
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