CFTC Warns Prediction Markets Over Gambling-Style Odds

Regulator urges clarity on odds formatting

The U.S. Commodity Futures Trading Commission (CFTC) has issued guidance telling regulated prediction market platforms to stop presenting contracts using American-style gambling odds. The instruction, reported Aug. 7, reflects growing tension between federal derivatives oversight and state gambling regulators over how event contracts — particularly those tied to sports — are marketed and priced.

What the CFTC said

The CFTC’s message is straightforward: prediction markets that operate under federal registration should avoid displaying prices in the familiar sportsbook format of positive and negative numbers — for example, +150 or -200 — which many consumers associate with wagering. Instead, prediction exchanges traditionally price contracts between $0 and $1 to reflect implied probability. The regulator also reminded registered entities that event contracts remain subject to U.S. derivatives law and warned against deceptive listing, advertising, or solicitation practices.

Why presentation matters for legal classification

At stake is more than aesthetics. How a platform displays pricing and promotes products can influence whether a product is treated as a derivatives contract regulated by the CFTC or as a wager subject to state gambling rules. Federal law, notably the Commodity Exchange Act, gives the CFTC authority over designated contract markets and derivatives products. State attorneys general and gaming regulators counter that contracts tied to sporting events are, in substance, bets and therefore fall under state gambling jurisdiction.

Federal registration isn’t a shield for advertising

The CFTC’s guidance implies that federal registration does not give prediction markets carte blanche to mimic the look and feel of sportsbooks. Platforms that use gambling-style odds in promotions or product pages risk blurring regulatory lines, potentially inviting enforcement actions from state authorities or legal challenges that test jurisdictional boundaries.

High-profile legal fights put pressure on platforms

The guidance arrives amid several high-profile clashes. New York Attorney General Letitia James sued exchange Kalshi on July 31, alleging the platform operated an unlicensed gambling business by offering sports and other event contracts to New York residents. The state is seeking at least $36 billion in damages and penalties. Kalshi disputes the characterization and contends its status as a CFTC-regulated exchange places it outside state gambling oversight.

Forty-four state attorneys general recently urged the CFTC to withdraw and rewrite proposed prediction market rules, arguing states have historically regulated sports betting and should retain authority over sports-related contracts. Courts have also intervened: a Wisconsin federal court rejected a bid by the CFTC to preempt state application of gambling laws to prediction platforms, and Washington secured a preliminary injunction against Kalshi in July that allowed state enforcement to proceed.

Kalshi pursues emergency relief in Utah

Kalshi filed an emergency motion seeking an injunction pending appeal after a Utah federal court held that the state could enforce its anti-gambling laws against prediction markets. Legal experts say Kalshi sought expedited relief to avoid potential civil or criminal enforcement while the company pursues its appeal to the U.S. Court of Appeals for the Tenth Circuit. Although the Utah decision did not immediately block access to the platform for local users, state officials signaled intentions to enforce gambling statutes.

Compliance consequences for prediction market operators

The CFTC’s cautionary note underscores that federal oversight does not absolve prediction market operators of compliance obligations. Firms regulated as exchanges or designated contract markets must carefully review product displays, marketing copy, and customer outreach to ensure they do not inadvertently adopt sportsbook-style presentation or language that could be deemed solicitation of gambling.

Regulatory enforcement is already targeting misconduct on regulated platforms. In a recent enforcement example, former U.S. Representative George Santos agreed to return trading gains, pay a civil penalty, and accept a multi-year trading ban related to contracts traded on Kalshi. Such actions signal that both market conduct and promotional practices will remain in the regulator’s crosshairs.

Practical steps for platforms

To reduce legal and regulatory risk, prediction market operators should:

• Standardize pricing displays in probability-based formats (e.g., $0 to $1) rather than American-style odds.
• Audit marketing materials and referral messaging to avoid language commonly used by sportsbooks.
• Maintain robust disclosures about product legal status and applicable regulatory regimes.
• Coordinate with legal counsel on state-by-state compliance and pending litigation strategy.

What’s next for the industry

Pending appeals — including those in Utah and other jurisdictions — will be critical in determining whether federal registration can effectively insulate prediction markets from state gambling laws. If courts continue to permit state enforcement, platforms may face a patchwork of licensing requirements, operational restrictions, or forced product delistings in certain states. Conversely, an appellate victory for Kalshi or clearer rulemaking from the CFTC could reinforce a federal framework for event derivatives.

For crypto and blockchain-native prediction markets, the decision points have broader implications: how products are priced, advertised, and integrated with on-chain infrastructure could shape the industry’s regulatory trajectory. Market operators and investors should monitor ongoing litigation, CFTC guidance, and state enforcement actions closely as the line between regulated derivatives and state-regulated gambling remains contested.