What US regulation would mean for prediction markets
The CFTC has proposed new limits on event contracts tied to war, terrorism, and assassination. We read all 879 active Polymarket geopolitics markets against the proposal to see what a US-registered venue could list, rewrite, or lose.
Most markets are listable. Most of the volume is not.
Most geopolitics markets settle on elections, prices, treaties, and measurements. The CFTC's proposed rule does not reach those, so they stay listable. The geopolitics markets with the most trading volume are different. They settle on wars, attacks, and leadership changes that can be caused by violence, and the proposed rule reaches those under our reading. A US-registered venue that changed nothing would keep most of its markets and lose most of its volume.
We read each market by what it pays on, taken from its resolution terms, and we read it two ways. Under a narrow reading, the rule reaches a contract only when the event it settles on is itself an act of war, terrorism, or assassination. Under a broad reading, it also reaches contracts that settle on a neutral outcome, such as a leader leaving office, when violence is one possible path and the terms do not exclude it. The narrow reading leaves more markets listable, the broad one fewer, and the gap between them shows where the proposal still needs a clearer line.
Share of markets listable versus share of volume listable, under each reading.
The rule
In June the Commission published the proposed rule at 91 FR 35806. It rests on the CFTC's authority under CEA Section 5c(c)(5)(C) and would revise Rule 40.11, allowing the Commission to bar event contracts that involve war, terrorism, or assassination where listing them would be contrary to the public interest. The rule decides what a US-registered venue can list. It does not regulate traders directly.
Under the rule, every market falls into one of three categories
Settles on an election, price, treaty, or measurement the rule does not reach.
Reaches the rule only through a pathway that narrower terms can close, without changing the bet.
The rule reaches these and they cannot be cleanly rewritten. Review and any removals focus here.
Broad reading, shares of $633M total volume. Our data measures the size of the affected volume, not its composition or motivation.
- The clear targets are small. About $125M sits in direct-attack markets, which the Commission is right to reach.
- Most of the volume at risk can stay listable with tighter wording, without changing the bet.
- So the rule mostly changes how new contracts are written, rather than how many markets disappear.
The biggest gray area is a drafting question
The category with the most trading is the one the proposal defines least. $128M of volume changes status between the narrow and broad readings. Most of it is not direct-attack markets. It sits in leader and regime survival, where a contract can resolve through an ordinary political exit, a negotiated transition, or a violent one, unless the terms rule the violent path out.
This $128M band is a separate set from the $125M of direct-attack markets. So the biggest gray area comes down to how contracts are written, which is what the safe harbor addresses.
What the Commission should clarify
Give venues a clause they can copy so a market pays out only on peaceful outcomes, like an election, a court ruling, or a signed deal, and never on an act of war. This is the highest-leverage fix, because every new market would be written against it.
A market that pays when a ceasefire or peace deal is signed settles on an agreement. Confirm whether the rule covers it.
A market that pays when an attack happens differs from one that pays on a price or shipping figure a war happens to move. Keep the second kind out.
"Will a leader leave office by [date]?" reaches the rule because assassination is one way it resolves.
Resolves only by election, resignation, constitutional removal, or negotiated exit, and never by assassination, terrorism, or war.
One idea runs under all three asks. The rule should apply to what a contract settles on. War may be the reason an outcome happens without being the event the contract pays on. The full model clause is in the comment letter.
The comment window is open
A useful comment can name one boundary the Commission should clarify and say why it matters.
Methodology
We read every geopolitics market active on Polymarket on June 15, 2026, by what it pays on, under a narrow and a broad reading, then checked the reading against a hand-labeled set. Resolved and closed markets are excluded, which left 879. The full method, the seven rulings, the validation, and the data are below.
Open the full method, validation, and data
We first ask whether the event that makes a market pay out involves war, terrorism, or assassination. For markets within the rule, we then weigh public interest, which is what produces the highest-risk label.
The categories nest. Hard to list ($331M) contains the highest-risk set ($216M), which contains the $125M of direct-attack markets. A separate $128M band is the volume that flips between the narrow and broad readings. That band and the $125M of direct-attack markets are close in size by coincidence and barely overlap, and the $125M is in scope under either reading.
Under the narrow reading, 738 of 879 markets (84.0%) are listable as written, and under the broad reading, 542 (61.7%). By volume, the listable share falls from 51.6% to 31.3%.
We checked the reading against a hand-labeled set. It agreed on which markets the rule reaches 91 percent of the time, and the misses clustered in the same boundary categories the narrow-to-broad band already flags.
Two limits are worth naming. We read each market from public resolution text rather than on-chain oracle data, and the territory and facility group is flagged for human review before any number from it is used publicly. On timing, most of the in-scope volume under the broad reading resolves by the end of 2026, so a final rule binds mostly future listings.
This is a reading of the proposed rule. It is not legal advice.
File a few days early so Regulations.gov processing does not become the bottleneck.
Search Prediction Markets, RIN 3038-AF65.
Federal Register, published June 12, 2026.