On June 10, 2026, the Commodity Futures Trading Commission (CFTC or Commission) published a Notice of Proposed Rulemaking (NPRM) seeking public comment on proposed amendments to CFTC Regulation 40.11 and the addition of a new Appendix F to the CFTC’s Part 40 rules (Appendix F).1 The proposed amendments to CFTC Regulation 40.11 implement Section 5c(c)(5)(C) (Special Rule) of the Commodity Exchange Act (CEA).
In publishing the NPRM, CFTC Chairman Michael Selig explained that the amendments “are designed to deliver regulatory clarity by setting out clear criteria for determining when an event contract ‘involves’ an enumerated activity”2 —terrorism, assassination, war, gaming or conduct that is unlawful under federal or state law (Enumerated Activity). The NPRM then establishes a new framework, including Commission guidance, that sets forth the factors the Commission should consider when determining whether a contract “involving” those Enumerated Activities is contrary to the public interest.3 Below, we discuss in greater detail the three-step inquiry the Commission proposes to make before determining whether an event contract is prohibited.4 The three-step inquiry is as follows: (i) the Commission must determine whether agreements, contracts, transactions, or swaps in an excluded commodity are based upon an occurrence, extent of an occurrence, or contingency and therefore qualify as “event contracts”; (ii) the Commission must determine whether the event contracts “involve” an Enumerated Activity; and (iii) if the Commission determines that the event contracts involve such activity, the Commission may block a contract from being listed if it undertakes a public interest analysis and determines the event contract is affirmatively against the public interest.5
The public comment period for the NPRM will close on July 27, 2026. Interested parties are encouraged to provide feedback, particularly on the new text that could alter both CFTC Regulation 40.11 and the proposed Appendix F that would be codified as Part 40 of the CFTC’s rules.
The following client alert is not a comprehensive summary of the NPRM. However, the WilmerHale Futures and Derivatives Practice has identified 10 key takeaways from the NPRM as well as the CFTC’s recent actions related to event contracts and prediction markets. The WilmerHale Futures and Derivatives Practice is well-equipped to provide clients with assistance in submitting tailored responses to the NPRM.
1. The NPRM is the CFTC’s latest proactive move to demonstrate its jurisdiction over event contracts.
The NPRM comes after nearly two years of litigation over the scope of the Commission’s authority under the CEA’s Special Rule. In September 2023, the Commission disapproved a listing for congressional-control event contracts, based on a determination that those contracts involved “gaming” and “unlawful activity” under state law. In a subsequent challenge to the order, the US District Court for the District of Columbia held that the Commission had read “gaming” and “unlawful activity” too broadly;6 the DC Circuit then denied the CFTC’s request for a stay in October 2024, allowing the contracts to begin trading. The Commission ultimately withdrew its appeal in May 2025. That sequence left congressional-control contracts trading on a CFTC-designated contract market (DCM) and, more importantly, exposed the extent to which CFTC Regulation 40.11 lacked clear definitions and administrable limiting principles.
The scope of event contracts then expanded beyond political markets. As DCMs began to offer sports and other event-based contracts, state regulatory authorities increasingly sought to apply state gambling and licensing laws to products listed on CFTC-registered exchanges, prompting litigation in multiple jurisdictions, including Nevada and New Jersey.7 Arizona filed a criminal case against a CFTC-registered prediction market operator, a move that quickly led to federal injunctive relief. These cases continue today.
In February 2026, the CFTC stepped in directly, filing a rare amicus brief in the Ninth Circuit and arguing that exchange-traded event contracts are swaps subject to the Commission’s exclusive jurisdiction, such that conflicting state regulation is preempted.8 To date, the CFTC has filed amicus in three cases. The Commission then followed that litigation posture with a broader regulatory initiative, issuing an Advance Notice of Proposed Rulemaking (ANPRM) related to prediction markets in March 202610 and, together with the Department of Justice, suing Arizona, Connecticut, Illinois, New Mexico, New York, Minnesota, Rhode Island and Wisconsin in April through June 2026 to block state enforcement actions against prediction markets.11 Other cases continue to work through the courts—involving both DCMs and the CFTC as litigants. In some of these cases, opposing parties and courts have noted the tension between existing CFTC Regulation 40.11’s prohibition on “gaming” contracts and the CFTC’s decision to allow sports-related event contracts to continue trading.
Against that backdrop, the NPRM is best understood as the Commission’s effort to translate its recent jurisdictional and policy arguments into a more formal regulatory framework for determining when event contracts “involve” gaming, unlawful activity or other enumerated subjects and when those contracts should be found contrary to the public interest.
As was the case with the ANPRM, the NPRM identifies the CFTC Office of the General Counsel as the lead division responsible for the NPRM. Historically, proposed rules are generally developed by one of the operating divisions, like the Division of Market Oversight (DMO), with support provided by the Office of General Counsel and other offices within the Commission. For example, the prior administration’s attempt to amend CFTC Regulation 40.11 was led by the DMO in 2024.12
This approach suggests that the Commission could move other priority rulemakings from the operating divisions to the Office of General Counsel, centralizing the development of new regulations and amendments to existing rules. This practice might allow the Commission to move more quickly given recent staffing shortages, which is important for event contract policymaking (about which we expect several additional releases). It also would be important if Congress adopts cryptocurrency market structure legislation and the CFTC is tasked with implementing new rules under ambitious legislative deadlines.
Interestingly, the NPRM only has a few references to the recently concluded ANPRM and the more than 3,500 comments received in response to that release.13 Given the wide range of questions posed in the ANPRM, we expect responsive comments will inform future Commission rulemakings. At the same time, the relatively modest references to those comments in the NPRM suggest that the NPRM may have been developed during the ANPRM public comment period.
3. The NPRM’s structure is a departure from the existing rule and prior proposed amendments.
We observe that this NPRM takes a different approach and provides a more prescriptive method to implement the relevant CEA provision, while historically the CEA has been implemented using a more principles-based regulatory framework. This observation is not intended to say that a different approach is unworkable or inappropriate, or that it is somehow flawed.
Current CFTC Regulation 40.11, which was adopted in 2011, is split into two sections, each with two subsections.14 Six paragraphs constitute the entire rule and set forth a blanket determination that contracts “involving” certain Enumerated Activities are against the public interest, without defining the Enumerated Activities or whether or how those contracts should be found to be contrary to the public interest. Further, amendments proposed in 2024, which were never adopted, were comparably brief—the regulatory text extended for only one and a half columns in the Federal Register.15
The NPRM, by contrast, runs nearly three pages in the Federal Register. The proposed amendments to CFTC Regulation 40.11 are then supplemented by a new Appendix F, which goes on for another nine pages in the Federal Register. Unlike the existing rule, the proposed amendments set forth a detailed scheme to determine when a contract “involves” an Enumerated Activity and then, as described below, whether it is against the public interest, using a complex series of multifactor tests.
4. The Commission proposes to define “gaming,” when a contract “involves” gaming and the public interest factors required to make a “public interest” determination.Gaming is one of the Enumerated Activities under the Special Rule. Accordingly, contracts that involve gaming are subject to the public interest analysis.
To facilitate the analysis of whether an event contract involves gaming, the proposal defines the term “gaming” as “any activity that: (i) one or more participants typically engage in for purposes of recreation or to entertain others; (ii) is governed by rules; and (iii) includes measurable occurrences or outcomes that depend on the participants’ luck, skill, or athletic ability during the activity.”16 The Commission explains that this definition is derived in part from dictionary definitions of the term “game” and encompasses a broad array of activities, ranging from sports to games of chance, discussed below.17
Under this approach, an activity constitutes gaming only if it satisfies each prong of the definition. As a result, if the activity does not have a recreational or entertainment purpose, or if the outcome of the activity does not depend on the participants’ luck, skill or athletic ability during the activity, it would not constitute gaming.18 For this reason, the Commission notes that political elections and contests like the Nobel Prize and Academy Awards do not constitute gaming.19
Consistent with the NPRM’s definition of “involve,” a contract only involves gaming if its settlement is determined by the occurrence, extent of an occurrence or contingency in a gaming activity.20 While some commenters to the March 2026 ANPRM advocated for a wagering or gambling-centered definition of gaming, the Commission states that this approach would be “overbroad” and potentially encompass all event contracts.21 The Commission’s proposed approach, by contrast, is narrower in scope and ties the settlement of the contract to the gaming activity itself. For example, an event contract based on whether a football player will score a certain number of touchdowns involves gaming because the settlement is determined by an occurrence in the football game.22 However, a contract based on football game attendance does not involve gaming—even if the contract is the subject of gambling or wagering—because the settlement is determined by ticket-purchasing decisions, which are not an occurrence in the game itself.23
Consistent with the three-step analysis described above, for contracts that involve gaming, the NPRM then sets forth several gaming-specific factors, in addition to the general-purpose factors that apply to all event contracts, to determine whether such contracts are contrary to the public interest. With respect to sports-related event contracts that involve gaming, the fact that a contract settles “based on the overall outcome of a sporting event” is a factor against finding that the contract is contrary to the public interest.24 Other relevant factors for determining when sports-related event contracts that involve gaming are not contrary to the public interest include the involvement of objective and verifiable settlement data, established sport-level integrity infrastructure, and information sharing and coordination with sports leagues and governing bodies.25 Conversely, factors that may indicate that sports-related contracts that involve gaming are contrary to the public interest include whether the contracts settle by reference to player injuries, officiating outcomes, discrete actions, physical altercations or pre-collegiate sports events.26
5. The NPRM sets forth a framework to evaluate contracts involving activity that is unlawful under any federal or state law.
An “activity that is unlawful under any Federal or State law” is one of the Enumerated Activities under the Special Rule. Contracts that involve or reference such Enumerated Activity may be determined to be contrary to the public interest and therefore prohibited.
In the NPRM, the Commission preliminarily concludes that it is not necessary to adopt a definition of “activity that is unlawful under any Federal or State law.”27 Instead, proposed CFTC Regulation 40.11 and accompanying Appendix F would direct the Commission to evaluate the relevant underlying legal framework and assess whether the occurrence or contingency on which the contract is based arises from unlawful conduct under federal or state law.28 In the NPRM, the Commission explains that it intends to apply a structured public interest analysis to determine whether particular contracts referencing Enumerated Activities should be permitted.29 For example, where an activity is unlawful in some states, the Commission may permit the related event contract unless it determines, based on the public interest factors under proposed CFTC Regulation 40.11 and Appendix F, that the related event contract would be contrary to the public interest. In such a case, the Commission would be more likely to conclude that the contract involves unlawful activity and falls within the scope of the Special Rule.30
The Commission suggests that event contracts tied to conduct that is unlawful under federal law would, in most cases, present significant public interest concerns and thus be unlikely to be permissible, particularly where the contract could incentivize or otherwise relate to specific unlawful acts.31 By contrast, the Commission believes that event contracts that involve activities that are illegal under state law could raise public interest concerns, but that a more detailed analysis is required before disapproving a proposed listing.32 In doing so, the Commission would survey applicable state statutes, consider relevant judicial precedent, assess the degree of variation across jurisdictions and evaluate whether the activity is generally understood to cause public harm.33 These considerations would then be weighed together with the broader public interest factors to determine whether the contract should be deemed contrary to the public interest for purposes of the Special Rule, even if it is illegal under at least some state laws. For example, the Commission proposes that event contracts that involve more specific unlawful actions, such that involve aggregate crime rate in a geographic area over extended periods would weigh against finding such contracts as contrary to public interest, on the basis that such contracts may have price basing or information utility in such matters.34 However, to the extent that trading in such event contracts would yield meaningful information about specific criminal action that should be shared with the appropriate authorities, it would be contrary to the public interest as it would compromise law enforcement efforts.35
6. The NPRM sets forth a framework and specific considerations for assassination, war and terrorism.
The next three Enumerated Activities under CEA Section 5c(c)(5)(c) are terrorism, assassination and war. As is true with all five Enumerated Activities, the CFTC has express authority to prohibit event contracts that involve any of these categories, if deemed by the Commission to be contrary to the public interest.
Consistent with its approach to unlawful activity, the Commission does not propose to adopt formal definitions of terrorism, assassination or war. Instead, as proposed, the Commission will assess “the extent to which the event contracts involve violent or destructive activities occurring outside the United States with an element of coercion or intimidation and some relationship to political or social groups or ideologies, intentional killing of an individual outside the United States, or belligerent military activities and violent activities by organized groups, respectively.”36 The Commission will use the guidance provided in proposed Appendix F to perform the analysis to determine whether activities fall within these definitions, interpreting the Enumerated Activities broadly.37 The NPRM’s discussion of traditional definitions of terms such as terrorism showcases the Commission’s broad approach.38
Moreover, the NPRM emphasizes that the analysis of whether activities constitute terrorism, assassination or war will apply to more than just contracts whose settlement involves an Enumerated Activity on its face. If the settlement can be reached through a causal pathway connected to terrorism, war or assassination, the event contract will be considered to involve an Enumerated Activity, even if there are other causal pathways not involving the Enumerated Activity.39 The Commission emphasizes that allowing contracts that are drafted broadly enough to encompass pathways involving Enumerated Activities—even if not directly connected to terrorism, war or assassination—undermines the purpose of the Special Rule.
The NPRM also outlines public interest considerations specific to terrorism, assassination and war—including national security risks, violence and harm to human life—and emphasizes that event contracts involving such activities are “highly likely to be against the public interest.”40 The Commission believes these Enumerated Activities have the potential to distract law enforcement and military authorities, increase information leaks, and incentivize individuals to trade on information rather than report it or to participate directly in the activities for financial gain.41 The Commission further cites to the concept of profiting from violent or catastrophic events as fundamentally at odds with the public interest. The Commission also notes that the inherently uncertain nature of the underlying Enumerated Activities presents a challenge for settlement integrity.42 Notably, the NPRM does not provide any examples of an event contract involving terrorism, assassination or war that would not be against the public interest, further underscoring that such contracts are unlikely to ever satisfy the Commission’s public interest analysis.43
7. The Commission distinguishes between games of chance, games of skill and games of mixed chance and skill.
In applying the Special Rule to gaming, the Commission distinguishes between games of chance, games of skill and games of mixed chance and skill.44 The Commission proposes to define games of chance as games in which the outcome is structured to be random and outside any individual’s control, such as roulette.45 Games of skill are defined in the NPRM as those in which the outcome, while sometimes unpredictable, is not random because it depends on actions within the participants’ control.46 The Commission notes that many games, such as poker, combine chance and the participants’ skill and therefore have outcomes that are not “purely random.”47
The NPRM appears designed to create a framework for allowing event contracts that provide potentially significant information aggregation that could be beneficial to the public or markets at large, while prohibiting or discouraging markets that are readily susceptible to manipulation or “[provide] no meaningful information that could support decision making or market understanding.”48 The Commission preliminarily believes that event contracts involving games of chance with random outcomes are likely to be contrary to the public interest.49 Since participants cannot contribute any insight on whether random outcomes will occur, the Commission reasons that trading in these event contracts provides no meaningful information that could enhance decision-making or market understanding.50 As a result, the Commission holds that event contracts based on the random outcomes of games of chance would not advance any purposes of the CEA and would therefore be contrary to the public interest.51
For event contracts based on organized tournaments of games of mixed chance and skill, the Commission preliminarily believes these contracts would be less likely to be viewed as involving games of random chance.52 The Commission explains that although these games depend on luck, they can also be significantly influenced by the participants’ skill, especially when repeated over many rounds in an organized tournament.53
8. The Commission proposes a series of factors to be considered in making public interest determinations.
Proposed CFTC Regulation 40.11(a)(5) sets out the factors that apply to all event contracts subject to the Special Rule, and proposed CFTC Regulation 40.11(a)(6) sets out factors specific to particular Enumerated Activities, which the Commission would apply in determining whether event contracts subject to the Special Rule are contrary to the public interest.54 The Commission adopts a multifactor structure deliberately over a single standard, reasoning that a multifactor approach “allows the Commission to account for the diversity and complexity of event contracts that could fall within the Enumerated Activities,” and “enables the Commission to weigh different dimensions of potential harm or public benefit—including the event contract’s hedging or price-basing utility or potential to encourage illicit behavior—while also accommodating novel event contract designs and market developments and supporting innovation.”55 The Commission cautions, however, that “no single public interest factor discussed below would be dispositive.”
There are three general factors under proposed CFTC Regulation 40.11(a)(5): price discovery and information aggregation utility, potential threats to market integrity, and compliance and self-regulatory capacity. With respect to price discovery and information aggregation utility, the Commission disclaims any revival of the previously utilized “economic purpose test,”56 stating that “it is not necessary to demonstrate that event contracts have a reasonable potential for a hedging or pricing function to avoid a finding that the event contracts are contrary to the public interest,” though such potential “would be a significant factor against” an adverse finding.57 This factor weighs against listing only where contracts “lack the potential to inform any economic, commercial or financial decisions,” such as those settling “based on purely random events.”58 The market integrity factor, which addresses risks inhering in the contracts themselves, operates “beyond and separate from a DCM’s or swap execution facility’s analysis of a contract’s compliance with the CEA,” and emphasizes that settlement criteria must be “clear, objective, and publicly verifiable.”59 The third factor asks “whether the prediction market, given its existing compliance, surveillance, and dispute-resolution infrastructure, can discharge its statutory self-regulatory obligations with respect to the event contracts.”60
The activity-specific public interest factors under proposed CFTC Regulation 40.11(a)(6) supplement rather than replace the general public interest factors.61 As noted above, the Commission concludes that “all event contracts involving terrorism, assassination, and war are highly likely to be against the public interest,”62 while the gaming factors favor aggregate-outcome sports contracts settled on “publicly reported, league-verified, or otherwise objectively determinable data”63 and disfavor contracts on injuries, officiating, discrete actions, altercations and pre-collegiate sports.64 Even so, the Commission states that such contracts “remain subject to factor-by-factor weighing.”65 Notably, the Commission states that “the Special Rule applies ‘[i]n connection with the listing of’ event contracts but does not impose a specific time limit on when the Commission may commence a public interest review of event contracts,”66 and as such, “the Commission preliminarily anticipates that its determinations that event contracts are contrary to the public interest might entail the delisting of at least some event contracts that are actively trading.”67
9. The NPRM is designed to mitigate insider trading concerns.
Since the emergence of event contracts as a significant asset class, there have been several allegations of misuse of confidential information. These allegations have raised concerns that company insiders have inappropriately used nonpublic information, that government personnel have traded based on classified information, and that certain individuals have inappropriately benefited from the outcome of certain contracts that were within the control of a single person or small number of individuals.
The Commission and prediction markets, in their self-regulatory capacities, have been aggressive in responding to these concerns. In March, the CFTC’s recently appointed Director of Enforcement highlighted “insider trading in prediction markets” as one of his top priorities for 2026.68 Since then, the CFTC and the Department of Justice have brought actions alleging that individuals violated Section 6c of the CEA and Regulation 180.1 by trading event contracts using material information obtained in violation of a preexisting duty.69 In addition, a prediction market has brought disciplinary actions against individuals who violated exchange rules by participating in markets over which the trader is a “decision maker, either directly or indirectly, or has any influence, directly or indirectly, no matter the scale and importance of the influence, on the outcome of the Underlying (event) of any Contract.”70
The NPRM builds on the prediction markets’ prophylactic approach by considering “potential threats to market integrity” as part of the proposed public interest determination and, accordingly, reasons to disapprove proposed listings. Specifically, the NPRM’s proposed framework for making public interest determinations explicitly considers whether “the event contracts present a particular risk of manipulation or market disruption, exhibit settlement integrity deficits arising from the event contracts’ particular characteristics, or create particular risks of information leakage or exploitation of material non-public information by insiders.”71 Under this framework, if a contract’s “structural features,” such as “the sensitivity of the underlying information, the concentration of insight among a small number of individuals, or the nature of the activity to which the contract refers,” “give rise to identifiable concerns regarding the leakage, misuse, unlawful acquisition, or third-party exploitation of privileged information, and where a prediction market has not implemented adequate safeguards, those concerns will weigh in favor of finding the event contracts contrary to the public interest.” As examples, the NPRM expresses skepticism toward contracts based on officiating decisions and contracts that settle solely by reference to a discrete action, event, or occurrence in sporting events, including contracts based on “the type of a specific play called for or executed by a specific player or team.” Without adopting a per se prohibition on these contracts, the Commission noted they are likely not in the public interest because their outcome is based on “discrete human decisions made by identifiable individuals under significant pressure and with limited accountability in real time” and do not provide market participants with sufficient information to make meaningful predictions about their outcomes.72
While not explicit, this approach appears designed to reduce or eliminate many of the contracts that raise the most market integrity concerns, without modifying the CEA’s approach to insider trading.
10. The CFTC proposes a quick transition to the new rules.
The Commission proposes that, if approved, the proposed amendments to Rule 40.11 and the addition of a new Appendix F would take effect 60 days after the publication of the final rule in the Federal Register.73 At such time, Commission staff would commence their review of certified event contracts as set forth in the NPRM.74 The NPRM states that the Commission preliminarily believes that “the public interest is served by preventing the listing and trading of event contracts that are contrary to the public interest as soon as practicable.”75 As described above, this review could result in the delisting of actively trading contracts, though it is not clear how this proposed effective date squares with the specific review timing window for contracts under the text of the proposed rule.76
With respect to severability of the proposed rule, if adopted, the NPRM expressly states that the Commission “intends that if any provision of the Proposal were to be held to be invalid or unenforceable facially, or as applied to any person, plaintiff, or circumstance, the provision shall be severable from the remainder of the Proposal, and shall not affect the remainder thereof, and the invalidation of any specific application of a provision shall not affect the application of the provision to other persons or circumstances.”77 By including this severability language, the Commission appears to recognize that the proposed rule may be subject to legal challenge.
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The NPRM represents a monumental development with respect to the Commission’s efforts to address event contracts regulation. If approved, this proposal would expand the legal architecture that governs event contract market regulation, particularly for the Enumerated Activities identified in the Special Rule. Market participants should carefully evaluate the potential impact of the NPRM on contracts, markets and business operations. Because this is unlikely to be the last CFTC rulemaking on event contracts, interested parties should also consider the precedential nature of this proposed rulemaking. Comments are due on July 27.78
