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Major leaders from large U.S. financial exchanges say prediction markets need stronger and clearer federal regulation. The call comes as event contract trading grows on platforms such as Kalshi and Polymarket.
Good to Know
Prediction markets allow traders to buy contracts tied to the outcome of real world events such as elections, economic data, or sports results. Prices reflect the market belief about how likely an event is to occur.
Nasdaq CEO Adena Friedman said consistent regulation is important for investor safety and market growth.
“Markets thrive when we have consistent regulation, and it allows investors, first of all, to be protected,” Friedman said during the FIA Global Cleared Markets Conference.
Friedman added that Nasdaq has approached the U.S. Securities and Exchange Commission about creating a structure that works within existing options market rules.
“We are going to the (Securities and Exchange Commission) because the options markets are governed by the SEC, and we want to make sure that within the confines of the rule base that we operate it in, we can create a construct that will work for investors.”
Interest in prediction markets increased sharply during the 2024 U.S. presidential election, when traders used the platforms to speculate on political outcomes. Since then, the sector has drawn billions in investment from financial firms.
CME Group CEO Terry Duffy also stressed the need for durable regulation that does not change with every political cycle.
“Solid regulation” would help prediction market exchanges operate without constant rule changes from different presidential administrations, Duffy said.
“I think that’s the biggest problem we have, especially with crypto and especially with predictions,” Duffy said.
Prediction markets currently fall under oversight from the Commodity Futures Trading Commission, which regulates derivatives markets. The SEC also has authority over certain financial instruments, and the two agencies announced in 2025 that they would cooperate on supervision of event contract trading.
At the same time, some lawmakers have raised concerns about manipulation risks. Critics point to cases where traders might profit from inside information tied to political events, conflicts, or government actions.
Several members of Congress have already proposed limits on prediction markets. Proposals include banning contracts tied to war or death events and preventing public officials from trading on such platforms.
As trading volumes grow and new financial products appear, debate continues in Washington over how prediction markets should fit into existing financial regulation.