# How we read each market

This is the rulebook behind the report *What US regulation would mean for prediction markets*. It explains the test we applied to every active geopolitics market on Polymarket and the seven rulings we used for the recurring hard cases. This is a reading of the proposed rule. It is not legal advice.

**The test**

The CFTC's proposed rule lets the Commission restrict event contracts that involve an enumerated activity, and for geopolitics that means war, terrorism, or assassination, when those contracts are contrary to the public interest. We read each market on two questions.

The first question is scope. Does the event that makes the market pay out involve war, terrorism, or assassination? We answer it three ways.

- Outside the rule. The market settles on a measurement or a lawful act, such as a price, a vote, a signed treaty, a court ruling, or an official action.
- Direct act. The market settles on an act of war, terrorism, or assassination itself.
- Reachable by pathway. The market settles on a neutral outcome that could be reached through war, terrorism, or assassination, and the terms do not rule that route out.

The second question, asked only for markets that are within the rule, is public interest. This is where we weigh whether an in-scope market carries enough forecasting or hedging value to survive review, and it is what produces the highest-risk label.

We read every market twice, once under a narrow reading and once under a broad reading, and we report a band rather than a single number, because the rule is a proposal and its boundary can still move. A narrow reading catches fewer markets, so more stay listable. A broad reading catches more, so fewer do.

The single most important idea is this. We read the settlement-determining occurrence, the event that actually makes the contract pay out, taken from the resolution text rather than the title. A market on an oil-shipping count reads differently from a market on a missile strike, even when both concern the same conflict.

**The seven rulings**

These handle the recurring hard cases. Each was decided once and applied the same way to every market that fit it.

1. A leader leaving office. Outside the rule under the narrow reading, reachable by pathway under the broad reading, because assassination is one way a leadership change can happen. A market whose terms exclude violent removal moves outside the rule.
2. A ceasefire or peace deal. Outside under the narrow reading, reachable by pathway under the broad reading, because the settlement is a signed agreement whose subject is the end of fighting. Pledges, normalization, recognition, trade, and disarmament agreements stay outside the rule under both readings, because an act of war cannot itself trigger a signature.
3. A country closing its own airspace. Outside the rule, because the settlement is a civil-aviation decision, unless the terms define the closure by reference to a strike.
4. Control of territory. Treated as a control-status market, outside under the narrow reading and reachable by pathway under the broad reading, and usually rewritable. It counts as a direct act only when the terms require a military operation as the event that settles it.
5. Sovereignty, annexation, or joining another country. Outside the rule by default, because the settlement is a legal or political act, unless the terms require taking the territory by force.
6. Possession of a facility or stockpile. Treated as a control-status market and usually rewritable through handover, transfer, or custody terms. It counts as a direct act only when the terms require seizure or a military operation.
7. Forces entering territory. A direct act by default, because a force crossing into contested or enemy territory is itself a belligerent movement, unless the terms describe a consensual deployment, peacekeeping, or basing.

**A model clause venues could use**

Most markets that are reachable by pathway can be brought outside the rule with terms that name the qualifying outcomes and rule out the violent route.

> This market resolves yes only if the outcome occurs by reason of one or more of the following: electoral defeat, resignation, constitutional removal, legislative or regulatory action, final court judgment, negotiated agreement, official administrative act, or natural death. It resolves no if the outcome occurs through any other means. For the avoidance of doubt, an outcome arising from assassination, terrorism, war, or other belligerent or organized violent activity will not cause this market to resolve yes.

**How to read the figures**

Every figure is reported by market count and by trading volume, and as a narrow-to-broad band. Being within the rule's reach is not the same as being barred. The scope figures measure how much would face review, while the highest-risk figure is the smaller share a venue might actually lose.

The companion files are the full dataset of all 879 markets and a short note on how we checked the work.