Prediction markets have been turning a single regulatory filing into permission to list many different bets. The U.S. Commodity Futures Trading Commission now says that shortcut has gone too far.
The regulator's Division of Market Oversight said on Friday, July 24, that broad templates can combine contracts with different settlement methods and data sources, leaving both regulators and traders unable to evaluate precisely how each market will resolve.
- Under Regulation 40.2, federally regulated exchanges can self-certify event contracts, yes-or-no wagers on real-world outcomes, without obtaining advance approval.
- The CFTC generally needs to receive the filing by the business day before trading begins.
Warning number two
In March, the CFTC warned exchanges that broad templates can omit key details, including the terms of each bet, how winners are determined and whether the contracts comply with federal rules.
Its latest advisory says many designated contract markets, or CFTC-regulated exchanges, continue using these templates to list new bets without seeking individual approval for each one.
Such templates "should not be submitted" under the standard self-certification procedure, the CFTC said. Staff may recommend pausing a listing or requiring an exchange to withdraw its filing and resubmit individual contracts.
Vague wording has already triggered huge fights across multiple prediction markets.
- Kalshi faces a lawsuit over a $54 million market asking whether Ali Khamenei would leave office by March 1. He was killed on Feb. 28, but Kalshi invoked a death carveout instead of paying Yes holders in full.
- Polymarket settled a $300 million market on whether Strategy would sell Bitcoin by May 31 as No, although it sold 32 BTC before the deadline, because the disclosure came June 1.
- It later treated a 60-day U.S.-Iran ceasefire as a "permanent peace deal" in a $479 million market series, prompting more legal threats.
Kalshi had seven blanks
On the advisory's July 24 date, Kalshi self-certified a political contract asking how many members of a chosen party would vote for or against a chosen bill in a chosen legislative chamber during a chosen period.
Its official name contained seven variables, covering the comparison, number, party, vote, bill, chamber and time period. Kalshi said it intended to list the contract "on a custom basis," with later versions added when needed.
The 13-page filing identified potential settlement sources ranging from official legislative records to Reuters, Bloomberg and several television networks. However, the specific bill, chamber and time period would be selected later.
The CFTC's database recorded 35 event-contract certifications dated July 24.
That count alone doesn't establish that any filing violated the regulator's guidance, while the advisory did not identify Kalshi or any other exchange.