The CFTC again warned prediction markets: disable “template-style” self-certification contract clauses—just reminded them at the end of March.

The U.S. CFTC issued its second warning to prediction market forecasts this year: banning “template-style” self-certification that overrides bulk contract compliance. A new announcement on July 24 said platforms batch-approved certification without providing clause analysis, with only a few days left before the public comment deadline.
（Background: a16z strongly supports the CFTC’s regulation of “prediction markets”! It sharply criticizes how state bans undermine fair market access and reduce market liquidity）
（Additional context: Polymarket submitted “combinatorial linked contracts” for CFTC certification! SEC Chair Atkins is currently seeking public input on a prediction market ETF）

Table of Contents

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• This is the second warning this year, after one in March
• A three-step analytical framework: certification will get stricter
• What is prediction market “self-certification”?
• Impact on investors in Taiwan

The U.S. Commodity Futures Trading Commission (CFTC) issued its second announcement of the year on July 24, warning that prediction market operators use “template-style” self-certification. Without providing the terms and analysis for each contract individually, they mass-process compliance certifications of event contracts.

In the announcement, the CFTC explicitly points out that many platforms, when self-certifying event contracts under its jurisdiction, do not supply the terms and conditions for every contract combination, nor do they provide a concise explanation and analysis regarding product terms, underlying commodities, and compliance.

This is the second warning this year, after one in March

This is not the first time the CFTC has raised this issue this year. As early as March 12, the agency had already released a similar warning, stating that prediction markets were treating overly general certification applications as a standard process. The new July 24 announcement again reiterated that broad template-style certification should not be submitted.

The CFTC also clarified that prediction markets do not need to obtain prior approval from the Commission to self-certify event contracts, as long as they follow the self-certification framework under the Commodity Exchange Act (Commodity Exchange Act) and CFTC regulations.

A three-step analytical framework: certification will get stricter

With the release of this announcement imminent, the CFTC’s July 27 public comment deadline is only a few days away. The agency has proposed rule amendments to establish a three-step analytical framework to evaluate event contracts:

• Step one: determine whether the contract involves activities such as terrorism, assassination, or gambling
• Step two: assess whether the contract terms are clear and verifiable
• Step three: confirm product compliance and the link to the underlying commodity

In analysis in June, law firm Ropes & Gray said that if the new rules go through, they would “fundamentally reshape” the regulatory framework for prediction markets.

What is prediction market “self-certification”?

The way prediction markets work is: platforms open “event contracts” (for example, “Who will be the U.S. president in 2026” or “Can Bitcoin break through $100k”), and investors bet on different outcomes. Each contract must go through CFTC’s self-certification process to show that its terms are clear, trading is fair, and it complies with regulations.

The core problem behind the CFTC’s warning this time is that many platforms (such as Polymarket, Kalshi, etc.) certify dozens or even hundreds of contracts using the same template file, rather than analyzing the differences in each contract’s terms one by one. It’s like using the same application form to apply for all bank loans—seems convenient, but ignores each contract’s individual characteristics.

Impact on investors in Taiwan

Even though investors in Taiwan do not directly participate in U.S. prediction market trading, CFTC regulatory trends can indirectly affect the market. If the new rules are approved, prediction markets’ certification process would become stricter, contract quality would improve, and the credibility of market data would also increase.

In addition, the CFTC’s three-step framework also provides a regulatory reference for other Asian prediction markets (such as Taiwan’s local prediction platforms). If Taiwan builds a similar prediction market in the future, it is likely to draw on this framework.

This article is sourced from CFTC official announcements, the CFTC March warning, and Ropes & Gray’s analysis, compiled and edited by 動區.