Federal regulators are moving to allow most sports betting while barring wagers on war and other controversial topics on prediction markets like Kalshi and Polymarket.
The Commodity Futures Trading Commission’s new proposed rules were published online Wednesday and came in the wake of a series of insider-trading scandals in the brave new world of prediction markets.
The new guidelines, first reported by the Wall Street Journal, are aimed at giving regulators the ability to nix bets it deems aren’t in the public interest or that are likely to be manipulated, such as in cases where one person could have a large impact on the result.
While most wagers on sports would be allowed, ones regarding player injuries and “first-pitch” gambling — which centers on things like the speed of a pitch — would be banned.
The same for practically all bets related to armed conflict, terrorism or assassinations, on the grounds they aren’t in the public interest.
Prediction market wagers on war-related topics have been an especially sensitive topic since information about conflicts could rely on top secret and classified information.
The CFTC’s proposals detail how regulators can review certain types of contracts on a case-by-case basis. The regulator is also considering rules to protect retail traders, according to the Journal.
Recent months have seen both the feds and prediction platforms take steps to crack down on shady bets.
Kalshi, led by CEO Tarek Mansour, said Tuesday that users who want to bet in markets that have the potential for foul play will need to submit an online form disclosing their employers, with the changes going into effect in the coming weeks.
Last month, House Oversight Committee Chairman James Comer demanded info from Kalshi and Polymarket’s CEOS over accusations the prediction markets have allowed insider trading to run rampant.
The Justice Department recently launched an investigation into disgraced ex-Rep. George Santos after he allegedly used Kalshi to bet on his own appearance at President Trump’s State of the Union address in February.
In May, the DOJ charged a Google software engineer with insider trading, alleging the employee made $1.2 million trading on confidential business information related to Google searches.
A US Army Special Forces soldier was arrested in April for using classified information about the military operation to capture Venezuelan dictator Nicolás Maduro to place winning bets on Polymarket.
In February, prediction market activity surged as suspected insiders made more than $1 million from contracts tied to the US-Israeli airstrikes on Iran.
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