The CFTC's 2026 Prediction Markets Advisory, Explained for California Traders

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1. What did the CFTC actually publish?
2. Why the February rule withdrawal matters more than the advisory
3. What does this mean for California traders?
4. What's still uncertain?
5. How should traders read this?
6. What's next?

Archived report: written in April 2026. Prices and details are as of then, not live.

On March 12, 2026, the CFTC (opens in a new tab)'s Division of Market Oversight published a Prediction Markets Advisory that, for the first time, lays out exactly what federally regulated event-contract platforms can and can't list. For California traders, locked out of every state-licensed sportsbook, it's the most consequential piece of paper of the year.

The advisory followed a February 4 decision by the CFTC to withdraw the 2024 Biden-era 'Event Contracts' rule proposal, which would have effectively banned sports contracts. New CFTC chairman Michael Selig has spent the spring rebuilding the framework from scratch. Here's what's actually in it, and what changes for California.

What did the CFTC actually publish?

The CFTC issued Staff Letter No. 26-08 on March 12, 2026, an advisory from the Division of Market Oversight clarifying how Designated Contract Markets, Kalshi (opens in a new tab), Polymarket (opens in a new tab)'s US arm, and a small number of others, should evaluate event contracts before listing them.

The advisory does three things. First, it confirms the CFTC's exclusive jurisdiction over prediction markets: a direct shot at state regulators trying to claim event contracts are 'gambling.' Second, it sets out a self-certification framework: platforms list contracts on their own authority, and the CFTC reviews after the fact. Third, it signals new rulemaking is coming, but in the meantime existing markets continue to operate.

For traders, the practical takeaway is simple: every contract you can buy on Kalshi today is presumptively legal under federal law, and the CFTC has now publicly backed that interpretation.

Why the February rule withdrawal matters more than the advisory

The bigger event was actually February 4, when CFTC Press Release 9179-26 withdrew the 2024 'Event Contracts' rulemaking and rescinded the staff sports-contract advisory that had hung over Kalshi for two years.

That 2024 proposal would have banned event contracts on 'gaming': a category that explicitly included sports. If it had been finalized, every NBA, NFL, MLB, and college contract on Kalshi would have been pulled. Withdrawing it removes the regulatory cliff edge that platforms had been pricing in since the Biden CFTC's 2023 letter to Kalshi.

Chairman Selig's statement was unusually direct: the CFTC will 'exercise its exclusive jurisdiction over prediction markets' and the previous proposal was 'not grounded in a rational and coherent interpretation of the Commodity Exchange Act (opens in a new tab).'

The 2024 rule that would have killed sports contracts is gone. The 2026 advisory replaces it with a green light.

What does this mean for California traders?

California still doesn't have legal sportsbooks. Two ballot measures failed in 2022 and there's no realistic path to legalization before 2028. That makes federally regulated prediction markets the only legal way for a California resident to take a position on a sporting event with real money.

The advisory supports that position. The CFTC asserts exclusive jurisdiction over these contracts, which is the argument platforms rely on when states such as New Jersey, Nevada and Massachusetts try to restrict them. The courts have not settled it: in August 2026 the Ninth Circuit, whose rulings bind federal courts in California, sided with Nevada at the preliminary stage.

For more on California's specific legal posture, see our California legality guide.

What's still uncertain?

Three things.

State litigation. Even with the CFTC asserting jurisdiction, individual states are pushing back. The federal government sued New York in April over its attempt to regulate Kalshi (Case No. 1:26-cv-3404, S.D.N.Y.) and has separately sued Connecticut, Arizona, and Illinois. Until those cases resolve, there's a small risk a state court issues an injunction that briefly disrupts service in that state. California is not currently in this litigation.

Insider trading. A group of Senate Democrats sent the CFTC a letter on April 30, 2026, urging the agency to specifically bar insider trading on prediction markets: a response to documented cases where users with nonpublic information about military operations, government decisions, or sports lineups appeared to trade ahead of the news. Any new rulemaking on this is months away but worth watching.

Election contracts. The 2024 Polymarket and Kalshi election markets created enormous political backlash. The advisory doesn't directly address whether election contracts will be allowed long-term. That's the most likely target of any restrictive rulemaking that does emerge.

How should traders read this?

Three practical conclusions:

1. Sports contracts are safe through 2026 at minimum. The 2024 ban proposal is dead, and any new rulemaking takes 12-18 months. Anyone holding off on a Kalshi or Polymarket account because they thought sports contracts might disappear can stop waiting.
2. Don't trade on nonpublic information. The Senate letter signals that the next round of enforcement will target insider trading specifically. The CFTC has full authority to refer cases to DOJ.
3. State-by-state risk is real but California isn't a target. If you're a California resident, the federal-state fight is happening in NY, CT, AZ, and IL, not here. Your access remains intact.

What's next?

The CFTC's public comment period on prediction markets closed April 30, 2026. Expect a draft of new rulemaking, separate from the March advisory, in late summer or fall. Until then, the advisory is the law of the land, and California traders have the clearest signal in two years that the federal door is open.

If you're new to event contracts, our how event contracts work guide covers the basics. Trade responsibly: call 1-800-GAMBLER or visit ncpgambling.org (opens in a new tab) if it stops being fun.

Frequently asked questions

What did the CFTC publish on March 12, 2026?

Staff Letter 26-08, an advisory from the Division of Market Oversight that sets out the CFTC's view that it has exclusive jurisdiction over prediction markets and clarifies how Designated Contract Markets like Kalshi and Polymarket should self-certify event contracts before listing them. The CFTC followed it with a proposed prediction-markets rule in June 2026, and the courts are still deciding how far federal jurisdiction reaches for sports contracts.

What was the 2024 'Event Contracts' rule that the CFTC withdrew?

A Biden-era rule proposal that would have banned event contracts on 'gaming,' a category that explicitly included sports. If finalized, it would have pulled every NBA, NFL, MLB, and college contract from Kalshi. The CFTC formally withdrew it on February 4, 2026 (Press Release 9179-26).

Does the advisory affect California traders specifically?

It supports the CFTC's view of its own jurisdiction, but it does not settle the court fight. Since then the Ninth Circuit, whose rulings bind California's federal courts, ruled against Kalshi at the preliminary stage (August 2026). California has not pursued enforcement actions against prediction markets, so practical access for California residents is unchanged for now.

Are sports contracts safe through 2026?

Almost certainly yes. The 2024 ban proposal is dead, and any new restrictive rulemaking takes 12-18 months to finalize. The earliest a sports-specific restriction could land would be late 2027.

What about election contracts?

Election contracts are the most likely target of any future restrictive rulemaking. The 2024 election cycle generated significant political backlash, and the new rulemaking expected in late 2026 may include election-specific carveouts. Sports, macro, and entertainment contracts are at much lower risk.

What's the insider-trading risk?

Senate Democrats sent the CFTC a letter on April 30, 2026 urging stricter enforcement on prediction-market insider trading, particularly on contracts tied to military, government, or sports outcomes where nonpublic information may exist. The CFTC has full authority to refer cases to DOJ. Don't trade on nonpublic information.

Where can I read the official text?

CFTC Press Release 9193-26 (March 12, 2026) and Staff Letter 26-08 are both available on cftc.gov. The February withdrawal is Press Release 9179-26.

How does the CFTC advisory affect Polymarket users in California?

Polymarket US operates through a CFTC-regulated exchange and clearing organization, so the advisory applies to it as it does to Kalshi. For California users it doesn't change access. Profits remain taxable federally and in California, so keep your trade history.

Are there limits on how much a Californian can trade under CFTC rules?

CFTC-regulated platforms like Kalshi may impose position limits on specific event contracts to maintain market integrity. These limits vary by the type of event and market liquidity. The advisory does not set a universal dollar cap for individual California retail traders across all platforms.