Prediction markets are expanding into new areas, including contracts linked to individual companies and their financial performance.
That growth is creating a new question for US regulators: when does a prediction contract become close enough to a stock or other security that it should fall under the SEC rather than the CFTC?
The Commodity Futures Trading Commission currently oversees federally regulated prediction markets and many of the event contracts traded on them. But the CFTC itself has acknowledged that some contracts connected to financial or commercial events could fall under the Securities and Exchange Commission instead.
The issue could become more important as prediction platforms introduce more markets connected to public companies and
economy prediction markets
become more popular.
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Why Could Stock-Linked Markets Fall Under the SEC?
The easiest way to understand the issue is to look at what each regulator normally handles.
The CFTC regulates derivatives markets, including futures, swaps and many event contracts. The SEC regulates securities, including stocks and securities-based financial products.
The line can become less clear when an event contract is directly tied to one company. For example, a prediction market might ask whether a public company will reach a certain financial target or report a particular business result.
That contract does not give the trader ownership of the company’s shares, but its outcome could still depend directly on the performance of that company.
The CFTC said in March that while event contracts on its registered markets can be swaps or futures under its jurisdiction, other contracts tied to financial, economic or commercial events may qualify as security-based swaps or other SEC-regulated products.
That is where the question of regulation starts.
Why Does It Matter Which Agency Is in Charge
The difference isn't just about which regulator gets to oversee a market, since different rules can apply depending on how a contract is classified. This is particularly important for everyday traders.
A comment submitted to the SEC and CFTC during a recent regulatory process argues that some company-specific event contracts could qualify as security-based swaps. Those products face much tighter rules for retail investors than ordinary event contracts available on CFTC-regulated prediction markets.
The submission specifically raised concerns about contracts tied to a public company's financial targets and other key performance measures.
There are also questions about inside information. Someone working for a company could know an earnings figure, product result or other important information before the public does. Regulators therefore have to consider how trading rules should deal with people who have access to that information.
Prediction Markets Are Growing Quickly
These questions are becoming harder to ignore because prediction markets now cover far more subjects than elections.
The CFTC says federally regulated markets certified around 1600 new event contracts in 2025, compared with an average of only about five per year between 2006 and 2020. Markets now cover financial data, economic indicators, politics, weather, sports, science and entertainment.
The agency is already working on updated rules for the sector. Its 2026 review asks for public input on issues including inside information, manipulation and the different types of events contracts that
prediction market apps
can offer.
For now, there isn't one simple rule saying every stock-linked prediction belongs to either the SEC or CFTC. The answer can depend on how the individual contract is designed and what it is based on.
As prediction markets move further into company and stock-related events, deciding where that line sits could become one of the industry’s biggest regulatory questions.
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