The World Cup kicked off in New York on June 13 - with over a hundred games played by 48 teams in 3 different countries. Billions are watching - 1.5 billion viewers was the rating for the last tournament’s final. And billions are being traded on its outcomes - prediction markets have already crossed $2 billion in tournament volume before a single match has been played.
It’s happening at a critical moment for this nascent industry: prediction markets are flourishing, but their integrity and legality are being scrutinized more than ever before. And the CFTC just published a proposed rule that, read carefully, contains one of the most consequential statements in the history of financial market regulation: whether a prediction market contract is legal to operate depends, in part, on whether it can be properly surveilled.
That sentence deserves to be read slowly. It is not a compliance observation. It is a product strategy.
How We Got Here
The legal history of prediction markets in the United States is a story of repeated collision between financial innovation and regulatory instinct.
The CFTC's authority over event contracts flows from a single statutory provision - the "Special Rule" under Section 5c(c)(5)(C) of the Commodity Exchange Act. It gives the Commission power to review and potentially prohibit contracts that "involve" one of five enumerated activities: unlawful activity, terrorism, assassination, war, or gaming. For decades, the CFTC interpreted that provision expansively. In 2012, it ordered Nadex's election contracts off the market. In 2023, it disapproved of Kalshi's congressional election contracts. Both orders rested on the same logic regarding “gaming”: That placing a financial stake on an event outcome is itself a form of gaming, regardless of what the underlying event is. Under that reading, the nature of the event, whether it’s a sports competition, an election or the Oscars, never mattered. The act of trading on it was enough to make it gaming, and therefore bar it from CFTC-regulated facilities.
Kalshi sued. In September 2024, the D.C. district court vacated the order, holding that "involve" refers to the underlying event - not the act of trading - and that an election is not a game. The CFTC's own legal theory, the one it had relied on for more than a decade, was rejected by a federal court. The CFTC initially appealed, and the D.C. Circuit briefly stayed the ruling, but by May 2025 the Commission dropped the appeal entirely. State-level pushback has continued into 2026, with several states challenging CFTC jurisdiction over event contracts in their courts. That ongoing litigation is part of why this June Notice of Proposed Rulemaking(NPRM) matters so much: instead of fighting contract by contract in court, the Commission is finally building a durable administrative framework.
What followed the 2024 ruling was one of the fastest regulatory evolutions capital markets had ever seen. With the legal barrier removed, platforms moved quickly. Kalshi obtained its DCM license and began listing event contracts at scale. Volume surged. The 2024 US election cycle became the industry's proof of concept - Polymarket alone processed more than $3 billion in trading volume on the presidential race, prediction markets were cited by major media outlets as forecasting tools, and retail and institutional participants arrived in numbers that would have seemed implausible two years earlier.
March 12: The First Signal on the Risk of Manipulation
On March 12, 2026, the CFTC's Division of Market Oversight issued Staff Advisory Letter 26-08 - addressed to all Designated Contract Markets, the exchanges where event contracts trade. The advisory did not create new rules. What it did was more important: it put the industry on formal notice that existing rules apply in full, and that the Commission intends to enforce them.
The advisory carried a specific and pointed message on manipulation risk. Event contracts, it said, carry heightened and novel risks - particularly contracts settling on outcomes controlled by a small number of actors: athletes. referees. political figures. For these contracts, DCMs are expected to demonstrate substantive, contract-specific manipulation analysis in product submissions. Boilerplate compliance language, the advisory warned, will cause delays or rejections.
The advisory also flagged something that traditional surveillance tools have no answer for: in prediction markets, the window between an informed actor acquiring an edge and acting on it can be measured in minutes. A sporting event resolves in hours. A political announcement resolves in seconds. Real-time surveillance isn't a best practice in this environment - it's a regulatory requirement under 17 CFR 38.157, and for prediction markets it needs to be genuinely real-time, with detection logic tuned to the specific risk profile of each contract type.
For anyone paying attention, the March advisory was a preview. The Commission was building toward something larger.
The NPRM: A Legal Map, and a Competitive Moat
In June 2026, the CFTC published its 267-page proposed rule - "Prediction Markets; Public Interest Determinations" (RIN 3038-AF65) - and with it, the first clear regulatory map of the prediction market landscape. It is the most significant document the industry has produced, and its implications for surveillance go far beyond compliance.
What follows is a summary of its most consequential elements.
The proposed framework works in two steps. First, an "involves" gate: a contract only triggers CFTC review if its settlement is determined by an occurrence inside one of the five enumerated activities. Critically, causal influence is irrelevant - only the settlement condition counts. A contract on oil volumes transiting the Strait of Hormuz does not involve war, even though a military conflict would move the number, because a commercial measurement settles it. If a contract fails this gate, the CFTC cannot touch it under this rule.
The implications of that first step are enormous. Economic indicators - CPI, GDP, jobless claims - sit outside the five enumerated categories, meaning the CFTC's path to a public interest block on these markets is fundamentally cleared. So do financial indicators, Fed decisions, election results, political outcomes, and awards contests. The election contract fight that consumed years of litigation and regulatory energy is, for practical purposes, over. Those markets are free.
The second step - the public interest test - is where surveillance becomes the central variable. Contracts that pass the first gate must then be separately evaluated for whether they are contrary to the public interest. The CFTC weighs informational and hedging utility against manipulation risk, settlement integrity, insider leakage risk, and the strain on the exchange's compliance capacity. And for sports contracts - the category that matters most for the World Cup - the Commission has laid out, with unusual specificity, the conditions under which it expects contracts to survive that test.
Three conditions. Objective and verifiable settlement data. An established integrity framework at the sport level. Information-sharing arrangements with leagues and governing bodies. When those three conditions hold, the CFTC said, sports contracts on aggregate outcomes - final scores, win-loss results, tournament advancement, player statistics - are unlikely to be found contrary to the public interest.
That presumption was not granted abstractly. The CFTC cited the surveillance track record of existing prediction market operators as part of the evidentiary basis for its favorable view. In other words, the compliance work already done by regulated platforms - the detection infrastructure, the integrity referrals, the cooperation with league officials - is part of what earned sports contracts their presumption of survival. The industry's investment in surveillance created the regulatory headroom that now benefits everyone operating in it.
The Contracts That May Not Survive
- And Why That's the Most Important Part
The NPRM also identifies the contracts expected to fail the public interest test, and the reasoning reveals something more important than the list itself.
Player injury contracts, referee decision contracts, discrete individual action contracts - will a specific player be substituted before the 60th minute, will a referee show a red card in the first half - and physical altercation contracts are all expected to fail. Not because sports are inherently problematic, but because these contracts share a structural characteristic that makes them uniquely dangerous: settlement is determined by the behavior of one or a very small number of identifiable people who can intentionally influence the outcome to profit on a position.
This is not just insider trading risk. It is something more fundamental. The person who can settle the contract is also a potential market participant, or is connected to one. A referee has direct control over whether a red card contract resolves YES. A team doctor has material non-public information about whether an injury contract resolves YES. And unlike a corporate executive with insider knowledge of an earnings announcement, these actors can do more than trade on the outcome - they can create it.
Match-fixing history in global soccer illustrates the point with precision. The contracts that organized crime has historically targeted are not "will Real Madrid win the Champions League" - they are "will there be a goal in the first ten minutes" and "will the referee give a penalty in the second half." Discrete, controllable outcomes. Single corrupted actors. Reliable delivery. The CFTC is not inventing a new concern. It is codifying one that Europol, Interpol, and FIFA's own integrity unit have documented for decades.
Pre-collegiate sports fail for an entirely different reason - participant protection, not manipulation risk. High school and college athletes are not professional market participants. Creating financial markets that settle on their individual performance creates exploitation risks and perverse incentives that the CFTC views as a public harm outweighing any informational value.
The Strategic Implication Nobody Is Talking About
Here is what the NPRM actually says, read carefully: the contracts that fail today fail largely because the manipulation surface is too concentrated and the surveillance infrastructure to police them at scale does not yet exist. The public interest test is not a permanent prohibition. It is a balancing test. And surveillance capability is explicitly one of the weights on the scale.
The three conditions that give aggregate sports contracts their presumption of survival are all surveillance-dependent. You cannot demonstrate objective settlement data without systems that verify it. You cannot maintain an established integrity framework without tools that enforce it. You cannot sustain information-sharing arrangements with leagues without the detection infrastructure that makes those arrangements meaningful.
Extend that logic to the contracts currently expected to fail - and the implication becomes clear. A platform that can demonstrate, with actual data and actual case history, that it can detect when a referee is trading on their own decisions, or when a team doctor is positioning ahead of an injury announcement, changes the public interest calculus. The manipulation surface is still concentrated. But if it can be reliably monitored, the informational and hedging utility of the contract may outweigh the residual risk.
The CFTC did not write a safe harbor that says demonstrate X surveillance capability and contract Y is approved. The public interest test remains a judgment call. But the logic of the framework is unmistakable: demonstrable, sophisticated surveillance infrastructure is the mechanism through which platforms can expand the contract universe over time.
The better your surveillance, the more you can list.
That is a competitive moat built on integrity. Platforms that treat compliance as a cost center will find their product roadmap capped by the public interest test. Platforms that treat surveillance as a core capability - something that generates case history, earns regulator trust, and creates the evidentiary record for the next product submission - will have access to contract categories that others simply cannot touch.
This is exactly the argument that has defined Solidus's positioning from the beginning. Solidus’ HALO wasn't built for a checklist. It was built for this moment.
Why the World Cup is Such a Test Moment
The World Cup arrives at this precise moment of regulatory crystallization. Two billion dollars in pre-tournament volume. Forty-eight teams. More than a hundred matches. A genuinely global retail participant base trading around the clock, from every jurisdiction, across onchain and offchain platforms simultaneously.
And a manipulation risk profile unlike anything regulated financial markets have previously encountered. The insider universe in a World Cup match is not a defined list of executives with access to material non-public information. It is players, coaches, medical staff, referees, officials, agents, and their extended networks - some of whom can not only trade on outcomes but create them. Match-fixing infrastructure that has operated across global soccer for decades is now in contact, for the first time at scale, with pseudonymous onchain prediction markets.
For platforms with serious surveillance infrastructure, the World Cup is an opportunity to demonstrate exactly what the CFTC's framework rewards. Clean markets. Integrity referrals. Cooperation with league officials. Detection capability that can surface coordinated abuse in real time. The track record built over the next month becomes the evidentiary basis for the next product submission, the next contract category, the next expansion of what is permissible.
For platforms without it, the World Cup is a different kind of test - one they are not prepared for, at the highest-visibility moment the industry has ever seen, in front of regulators in every jurisdiction simultaneously.
The CFTC has drawn the map. Surveillance is the terrain.
