Prediction Market Act of 2026
- Sponsor
- Sen. McCormick, David [R-PA]
- Committees
- Agriculture, Nutrition, and Forestry Committee (primary)
- Last action
- Apr 30, 2026
Bottom line
This bill seeks to establish a comprehensive regulatory and oversight framework for event contracts, aiming to protect retail investors and prevent illicit activities while providing the CFTC with expanded authority and resources.
What it actually does
This bill amends the Commodity Exchange Act to establish a new regulatory framework for "event contracts," which are prediction markets. It grants the Commodity Futures Trading Commission (CFTC) new authority to review and prohibit certain event contracts deemed contrary to the public interest, imposes enhanced disclosure and "know your customer" requirements, mandates fund segregation, and creates an Advisory Council on Consumer Protection and an Office of the Retail Advocate within the CFTC. The bill also prohibits Members of Congress and certain Executive Branch officials from trading event contracts and authorizes appropriations for CFTC oversight.
Proponents argue
Supporters argue the bill provides much-needed regulatory clarity and consumer protection for the emerging event contract market, preventing fraud, manipulation, and illicit activities while fostering responsible innovation. They highlight the creation of the Retail Advocate and Advisory Council as key mechanisms to protect individual investors and ensure market integrity.
Opponents contend
Critics might argue that the bill could stifle innovation in prediction markets by imposing overly burdensome regulations and giving the CFTC excessive power to determine what is "contrary to the public interest." Some might also contend that the prohibitions on certain officials trading event contracts are an overreach or that the new offices create unnecessary bureaucracy.
The bill is moderately complex, requiring careful reading to understand the regulatory changes and new institutional structures it proposes.
Section 2, amending Section 5c of the Commodity Exchange Act
Definition of Event Contracts and CFTC Review Authority
This section defines "event contract" as a contract based on an occurrence or contingency (excluding commodity price changes) listed by a designated contract market or swap execution facility. It grants the CFTC authority to determine if an event contract is "contrary to the public interest" if based on unlawful activity, terrorism, assassination, war, violence, gaming, or similar activities, and prohibits such contracts from being listed or traded.
Supporters argue
Supporters argue this is crucial for preventing the use of prediction markets for harmful or illicit activities, ensuring market integrity and public safety by giving the CFTC necessary oversight.
Critics contend
Critics might argue that the broad "contrary to the public interest" clause, especially "other similar activity," grants the CFTC too much discretionary power, potentially chilling legitimate innovation in prediction markets.
Tradeoffs
The provision balances market innovation and freedom with public safety and the prevention of illicit activities, requiring the CFTC to navigate a complex line.
Section 2, amending Section 5c(d)(2)(D)
Enhanced Certification and Disclosure for Event Contracts
This provision requires the CFTC to prescribe standardized requirements for the format of written certifications for new event contracts and disclosure requirements designed to promote retail customer readability. It also allows for the imposition of financial penalties for violations of these certification requirements.
Section 2, amending Section 5c(d)(3)
Restrictions on Promotional Material for Event Contracts
This section prohibits derivatives clearing organizations from using promotional material for non-eligible contract participants that is deceptive, contains material misstatements or omissions, mentions profit without an equally prominent discussion of risk, includes past performance without disclaimers, or uses unrepresentative or unpaid testimonials. The CFTC is directed to promulgate rules for enforcement.
Section 2, amending Section 5c(d)(4)
Anti-Money Laundering and Age Verification for Event Contracts
This provision requires derivatives clearing organizations offering event contracts to non-eligible contract participants to implement anti-money laundering (AML) compliance programs. These programs must include internal policies, ongoing training, independent testing, risk-based customer due diligence, and verification that individual customers have attained the age of 18 years.
Section 2, amending Section 5c(d)(6) and (7)
Establishment of Retail Advocate and Consumer Protection Advisory Council
This section mandates the establishment of an Advisory Council on Consumer Protection within 90 days to provide recommendations on retail investor participation and consumer protection in derivatives markets. It also creates an Office of the Retail Advocate within the CFTC to assist retail participants, analyze regulatory impacts, propose changes, conduct research, and operate with the Office of Customer Education and Outreach.
Section 3, amending Section 4c(a)(3) of the Commodity Exchange Act
Ban on Event Contract Trading for Members of Congress and Executive Officials
This section expands existing prohibitions to make it unlawful for any Member of Congress, the President, the Vice President, or any officer or employee described in sections 5312 through 5316 of title 5, United States Code (senior executive officials), to enter into an event contract.
Section 5
CFTC and Joint SEC/CFTC Studies on Event Contracts
This section mandates the CFTC to conduct a study on the size, structure, growth, and characteristics of event contract markets, including trader conduct and fraud prevention, with a report due within one year. It also requires a joint study with the Securities and Exchange Commission (SEC) on event contracts potentially under SEC jurisdiction and the role of decentralized blockchain applications, with a report due within 15 months.
Specifies that an event contract is "likely to be contrary to the public interest if the event contract materially encourages violence or similar unlawful activity."
Section 2, amending Section 5c(d)(2)(C)(ii)
Why it matters:This is standard legislative practice to provide specific guidance within broader grants of authority, rather than elevating every detail to a top-level clause.
Case for: Proponents would argue this provides a clear, actionable standard for the CFTC to apply when determining what constitutes "contrary to the public interest," preventing overly broad interpretations and focusing on direct harm.
Case against: Critics might argue that "materially encourages" is still subjective and could lead to inconsistent application or censorship of legitimate, albeit controversial, prediction markets.
Estimated impact: This criterion will directly influence which types of event contracts are permitted, potentially shaping the entire market for prediction products.
Requires derivatives clearing organizations to treat funds held for members and customers solely trading fully collateralized contracts separately from funds held for members and customers trading leveraged contracts for default management purposes.
Section 2, amending Section 5c(d)(5)(C)
Why it matters:This is a technical, risk-management detail that is appropriately placed within the operational requirements for clearing organizations.
Case for: Proponents would argue this is a critical safeguard for customer funds, especially for retail investors, ensuring that the risks associated with leveraged trading do not jeopardize the funds of those engaged in less risky, fully collateralized contracts.
Case against: Market operators might argue that this adds complexity to their clearing operations and could increase administrative costs, though the benefit of risk segregation is generally accepted.
Estimated impact: Significantly enhances financial stability and customer protection in the event of a clearing member default, particularly for retail participants.