Prediction Markets Versus Sportsbooks
Prediction markets and sportsbooks are two ways U.S. citizens can wager on the outcome of events. But the Commodity Futures Trading Commission (CFTC) says event contracts have been around in the United States since 1988, and have been regulated by the CFTC since 2004.
The CFTC says prediction markets must list only event contracts that are lawful and meet strict rules. Prediction markets must register with the CFTC as "designated contract markets," or DCMs. Each DCM must create and enforce its own rules, and also must monitor each trade for anomalies and abuses, including abuses like insider trading. Traders or venues that break the law risk enforcement from the CFTC for any violation.
Certain categories of events cannot be traded at all. The CFTC has said it may deem contracts to bet on an assassination, war, or terrorist attack as contrary to the public interest. To protect market integrity, the CFTC prohibits DCMs from listing these contracts.
In September 2026, the CFTC’s Division of Enforcement issued an advisory after public release of two enforcement cases involving misuse of nonpublic information and fraud in prediction markets. According to the CFTC, its Division of Enforcement has full authority to police DCMs, including ongoing and historical trading information for each deal.
The CFTC oversees derivatives markets. In June 2026, the agency proposed a rule to separate the permissioned market into contracts that have been lawfully permitted, and those still up for debate. These contracts include a wide variety of event categories.
The CFTC filed an amicus brief in the U.S. Court of Appeals for the Ninth Circuit confirming its exclusive jurisdiction as the only US regulator for lawful markets in derivatives, including event contracts. The brief confirms the CFTC's exclusive jurisdiction over commodity derivatives markets, including prediction markets.
When it comes to sports wagers, states have a more prominent role in regulation. Sports wagering is regulated under state gambling laws, not the CFTC's federal derivatives framework. This hierarchy leaves some laws and categories hard to categorize.
The outcomes for these two types of bets can vary widely. For prediction markets, fees and penalties are structured under CFTC-regulated counterparty frameworks. Sportsbooks don’t facilitate trade between nameless pairs. Instead, a licensed bookmaker earns a so-called “vig” or “juice”, a fee on every bet packaged into the price then displayed on the line.
We don’t know as much about the sportsbook side of the equation, yet. For example, the laws and rules governing or restricting sportsbooks make no explicit references to gambling risks. Sportsbooks may state these conditions in their user agreements, though. Defining a contract to beat an assassin or terrorist is clear enough. But where is the line from a daily fantasy league pick or market-maker bet on a college championship to a sportsbook’s listing for a corporate buyout?
This distinction is the basis of the CFTC’s current, active legal disputes. It’s still possible that a court could decide some event contracts are unregulated gambling, while others count as legal derivatives. Sportsbooks may find themselves on both sides of the legal boundary while trying to compete with their new prediction-market nemeses.
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Written by the IGCS DeskExplanatory desk covering online casinos, sportsbooks and the money that moves through them. We do not rank operators and we do not take bets: every page here is meant to answer one question and then get out of the way.
