The US derivatives regulator on Thursday published an advance notice of proposed rulemaking asking whether it should amend or introduce regulations governing event contract derivatives.

“Today’s action is an important step in the Commission’s continued effort to promote responsible innovation in our derivatives markets,” CFTC chair Michael Selig said.

“This begins the process of new rulemaking grounded in a rational and coherent interpretation of the Commodity Exchange Act, while reassuring the American people that the CFTC will exercise its exclusive jurisdiction over prediction markets.”

The consultation asks market participants to comment on the application of statutory core principles and existing CFTC regulations to prediction markets, the types of event contracts that could be prohibited as contrary to the public interest, and cost benefit considerations related to the growth of the sector.

The notice also highlights the rapid increase in event contract listings in recent years. Designated contract markets certified about 1,600 event contracts for trading in 2025, compared with an average of roughly five per year between 2006 and 2020.

The CFTC said staff are currently reviewing several applications for designated contract market status from entities primarily interested in operating prediction markets. The agency has also received additional enquiries from firms exploring potential applications.

The consultation follows comments from Selig earlier this week at the FIA Boca conference, where he said the regulator needed clearer rules for the fast growing sector but maintained that prediction markets have become an important source of information for traders and the wider public.

“The reality is that prediction market platforms are now viewed by the public as more accurate than political polls, which have been shown to be weighted against certain opponents, especially in the past 10-15 years,” Selig said during the speech.

Selig also confirmed at the conference that he had instructed staff to prepare an advance notice of proposed rulemaking in order to gather feedback on the market’s development and regulatory challenges.

Alongside the consultation, the CFTC’s Division of Market Oversight issued an advisory reminding designated contract markets of their regulatory obligations when listing event contracts.

The advisory emphasises that exchanges must comply with the Commodity Exchange Act’s core principles, including the requirement to list only products that are not readily susceptible to manipulation and to maintain effective market surveillance and enforcement procedures.

The division said exchanges should take “proactive steps to ensure their markets continue to evolve in a manner that complies with the CEA and Commission regulations”.

The guidance also highlights potential manipulation risks associated with certain sports related contracts, including those linked to injuries, officiating decisions or other actions that could be influenced by a single individual or small group of participants.

Staff encouraged exchanges to engage with the regulator during the early stages of product design and to consider working with sports leagues and integrity monitoring bodies when developing sports related event contracts.

The advisory also cautions exchanges against relying on overly broad contract specifications when self certifying event contracts, noting that different variations of a contract may present different manipulation risks and therefore require separate analysis under CFTC rules.

Comments on the consultation must be submitted within 45 days of the notice being published in the Federal Register.

The move comes after Selig launched into a forceful defence of the CFTC’s authority over US prediction markets last month in a video statement as state authorities challenge event contracts.

In February, the CFTC withdrew its 2024 event contracts proposal and rescinded related staff guidance, signalling a revised approach.