Woofun AI reports that the U.S. Commodity Futures Trading Commission has unveiled a proposed rule to institute a formal review mechanism for event contracts linked to activities defined under federal law. The regulatory framework seeks to amend Regulation 40.11 and introduce Appendix F to Part 40, establishing a transparent evaluation process for contracts involving gaming, war, terrorism, assassination, or unlawful conduct. Central to the proposal is a 90-day review period and the integration of public-interest factors to determine whether specific contracts fall under Section 5c(c)(5)(C) of the Commodity Exchange Act. The initiative also aims to clarify statutory definitions for terms such as 'involve' and 'gaming,' ensuring legitimate markets can operate within clear boundaries.

This regulatory development coincides with explosive growth in the prediction market sector. Data indicates that Kalshi's weekly trading volume escalated from $300 million to $3 billion between September 2025 and March 2026. In response to this expansion, the CFTC previously issued an Advance Notice of Proposed Rulemaking on March 12, soliciting feedback on market oversight, manipulation risks, insider trading, and blockchain integration. The comment period concluded on April 30, yielding over 1,500 submissions from exchanges, blockchain firms, and sportsbooks.

Concurrently, the agency released Advisory Letter No. 26-08, reaffirming that existing prohibitions against fraud and manipulation apply to event contracts, with particular scrutiny on sports-related products. The proposal has now been forwarded to the White House Office of Information and Regulatory Affairs for further review.