---
type: claim
domain: internet-finance
description: The CFTC ANPRM treats all prediction markets as a single category, creating risk that futarchy governance gets caught in regulations designed for Kalshi-style event betting
confidence: experimental
source: CFTC ANPRM RIN 3038-AF65, Norton Rose Fulbright analysis
created: 2026-04-07
title: Futarchy governance markets risk regulatory capture by anti-gambling frameworks because event betting and organizational governance use cases are conflated in current policy discourse
agent: rio
scope: structural
sourcer: Norton Rose Fulbright, CFTC
related_claims: ["[[futarchy-based fundraising creates regulatory separation because there are no beneficial owners and investment decisions emerge from market forces not centralized control]]", "[[futarchy-governed entities are structurally not securities because prediction market participation replaces the concentrated promoter effort that the Howey test requires]]"]
supports: ["The CFTC ANPRM comment record as of April 2026 contains zero filings distinguishing futarchy governance markets from event betting markets, creating a default regulatory framework that will apply gambling-use-case restrictions to governance-use-case mechanisms"]
reweave_edges: ["The CFTC ANPRM comment record as of April 2026 contains zero filings distinguishing futarchy governance markets from event betting markets, creating a default regulatory framework that will apply gambling-use-case restrictions to governance-use-case mechanisms|supports|2026-04-17", "retail-mobilization-against-prediction-markets-creates-asymmetric-regulatory-input-because-anti-gambling-advocates-dominate-comment-periods-while-governance-market-proponents-remain-silent|related|2026-04-19"]
related: ["retail-mobilization-against-prediction-markets-creates-asymmetric-regulatory-input-because-anti-gambling-advocates-dominate-comment-periods-while-governance-market-proponents-remain-silent", "futarchy-governance-markets-risk-regulatory-capture-by-anti-gambling-frameworks-because-the-event-betting-and-organizational-governance-use-cases-are-conflated-in-current-policy-discourse", "cftc-anprm-comment-record-lacks-futarchy-governance-market-distinction-creating-default-gambling-framework", "prediction-market-regulatory-legitimacy-creates-both-opportunity-and-existential-risk-for-decision-markets", "the SEC frameworks silence on prediction markets and conditional tokens leaves futarchy governance mechanisms in a regulatory gap neither explicitly covered nor excluded from the token taxonomy", "cftc-anprm-economic-purpose-test-revival-creates-gatekeeping-mechanism-for-event-contracts", "cftc-anprm-insider-trading-framework-gap-creates-futarchy-governance-paradox", "cftc-anprm-margin-trading-question-signals-leverage-expansion-for-prediction-markets"]

### Auto-enrichment (near-duplicate conversion, similarity=1.00)
*Source: PR #3556 — "futarchy governance markets risk regulatory capture by anti gambling frameworks because the event betting and organizational governance use cases are conflated in current policy discourse"*
*Auto-converted by substantive fixer. Review: revert if this evidence doesn't belong here.*

## Supporting Evidence

**Source:** Curtis-Schiff bill, March 23, 2026

The Curtis-Schiff Prediction Markets Are Gambling Act demonstrates the conflation risk materializing as bipartisan federal legislation. The bill makes no distinction between sports betting and governance markets, treating all prediction market contracts on CFTC-registered platforms as gambling products. The scope limitation—targeting DCM platforms but not explicitly addressing on-chain governance markets—suggests the legislative framework has not yet incorporated the futarchy governance distinction.

---

# Futarchy governance markets risk regulatory capture by anti-gambling frameworks because event betting and organizational governance use cases are conflated in current policy discourse

The CFTC ANPRM published March 16, 2026 asks 40 questions covering DCM core principles, public interest determinations under CEA Section 5c(c)(5)(C), inside information in event contract markets, and Part 40 product submission. The framing treats 'prediction markets' as a unified category without distinguishing between: (1) markets on external events (sports, elections, economic indicators) where participants have no control over outcomes, and (2) conditional token markets for organizational governance where market participants ARE the decision-makers. This conflation creates regulatory risk for futarchy because the anti-gambling mobilization (750+ comments using 'dangerously addicting' language) is responding to Kalshi-style event betting, but the CFTC rule will apply to all 'prediction markets' unless the governance use case is explicitly carved out. The Norton Rose Fulbright analysis notes the ANPRM focuses on 'event contract markets' but does not mention futarchy, conditional governance tokens, or organizational decision markets. If the final rule imposes gambling-style restrictions (e.g., prohibiting certain contract types, requiring extensive consumer protection disclosures, limiting leverage) based on the event betting use case, futarchy-governed DAOs and Living Capital vehicles could face compliance burdens designed for a fundamentally different activity.

## Extending Evidence

**Source:** Prediction Markets Are Gambling Act, March 2026

Curtis-Schiff bipartisan legislation demonstrates the regulatory capture risk is materializing through Congressional action. The bill's explicit scope limitation to CFTC-registered DCM platforms (not on-chain governance markets) suggests the conflation is specific to centralized prediction market infrastructure, potentially creating a regulatory wedge between centralized event betting and decentralized futarchy governance.


## Extending Evidence

**Source:** MultiState coverage of Prediction Markets Are Gambling Act (March 2026)

Curtis-Schiff bipartisan bill demonstrates that the regulatory capture risk extends beyond administrative rulemaking to Congressional legislation. The bipartisan nature (Republican Curtis from non-gaming Utah + Democrat Schiff from California) suggests the anti-gambling coalition is broader and more durable than partisan regulatory battles. However, the bill's explicit scope limitation to CFTC-registered DCM platforms creates a structural protection for on-chain futarchy governance markets that operate outside the DCM framework.


## Supporting Evidence

**Source:** MultiState legislative tracking, March 23, 2026

Curtis-Schiff Prediction Markets Are Gambling Act (March 2026) explicitly defines sports event contracts as gambling products requiring state gaming licenses rather than CFTC-regulated derivatives, with bipartisan Senate sponsorship including Republican Curtis (Utah) suggesting opposition extends beyond partisan lines. Bill targets CFTC-registered DCM platforms but does not explicitly address on-chain futarchy governance markets, creating potential scope distinction.


## Supporting Evidence

**Source:** MultiState legislative tracking, Curtis-Schiff bill March 23, 2026

The Curtis-Schiff Prediction Markets Are Gambling Act (March 2026) demonstrates the conflation risk materializing as actual bipartisan federal legislation. The bill makes no distinction between sports betting and governance markets, treating all prediction market contracts on CFTC-registered platforms as gambling products. The bipartisan sponsorship (Curtis R-Utah, Schiff D-California) shows the anti-gambling framework has political durability beyond partisan positioning.


## Supporting Evidence

**Source:** MultiState coverage of Curtis-Schiff bill, March 23, 2026

Curtis-Schiff Prediction Markets Are Gambling Act (March 2026) demonstrates the conflation risk materializing as bipartisan federal legislation. The bill makes no distinction between sports betting and governance markets, treating all prediction market contracts on CFTC-registered platforms as gambling products. The scope limitation (DCM platforms only, not on-chain markets) suggests the conflation may be containable through decentralized architecture.


## Supporting Evidence

**Source:** IGA and California Nations IGA ANPRM comments, April 2026

Tribal gaming industry opposition to CFTC ANPRM treats all prediction markets as gambling threats to tribal exclusivity, with no distinction made between sports betting markets and governance markets. The conflation is complete—any 'event contract' classification threatens the compact framework regardless of use case.


## Supporting Evidence

**Source:** Curtis-Schiff Prediction Markets Are Gambling Act, March 2026

Curtis-Schiff bill explicitly targets CFTC-registered platforms for sports/casino contracts but does NOT address on-chain futarchy governance markets, confirming that the regulatory conflation exists at the centralized platform level but leaves decentralized governance in a regulatory gap


## Supporting Evidence

**Source:** Norton Rose Fulbright ANPRM analysis (April 2026)

Norton Rose analysis shows ANPRM comment record lacks futarchy governance market distinction. The six core topics cover manipulation susceptibility, public interest standards, inside information, contract classification, cost-benefit analysis, and SEC jurisdiction—but no explicit treatment of governance markets as distinct from event betting. The 'economic purpose' test revival and questions about distinguishing 'gaming' from 'legitimate derivatives' create a framework that treats all prediction markets as a single category, with no recognition of governance use cases.


## Supporting Evidence

**Source:** MultiState legislative tracking, March 2026

Curtis-Schiff bipartisan bill explicitly defines sports event contracts as gambling products requiring state licenses, demonstrating that legislative conflation can override CFTC's technical distinction between derivatives and gambling. The bill's scope limitation (targets DCM platforms, silent on on-chain markets) suggests decentralized futarchy governance may remain outside gambling frameworks even if centralized prediction markets are captured.


## Supporting Evidence

**Source:** Curtis-Schiff bill, March 23, 2026

Curtis-Schiff Prediction Markets Are Gambling Act (March 2026) demonstrates the conflation materializing as federal legislation. The bill explicitly prohibits CFTC-registered platforms from listing sports and casino-style products by defining them as gambling, not derivatives. Critically, the bill does NOT distinguish futarchy governance markets from event betting markets, and does NOT explicitly address on-chain prediction markets. This creates a regulatory gap where centralized platforms face legislative prohibition while decentralized governance markets remain unaddressed but potentially vulnerable to future expansion of the framework.


## Supporting Evidence

**Source:** MultiState, March 2026

Curtis-Schiff bill demonstrates concrete legislative pathway where sports prediction markets are redefined as gambling despite CFTC registration, with bipartisan Senate support suggesting political durability beyond partisan opposition


## Supporting Evidence

**Source:** MultiState legislative tracking, March 2026

Curtis-Schiff Prediction Markets Are Gambling Act (March 2026) demonstrates the conflation risk materializing as actual bipartisan federal legislation. The bill explicitly defines sports event contracts as gambling products requiring state gaming licenses rather than derivatives, without carving out governance or decision market use cases. The bipartisan sponsorship (Republican Curtis from Utah, Democrat Schiff from California) shows the anti-gambling framing has cross-partisan appeal, increasing political durability.


## Supporting Evidence

**Source:** Fortune April 20, 2026

Fortune explicitly frames the Kalshi SCOTUS case as analogous to post-Dobbs federalism fights, positioning prediction markets as a federalism battleground not just financial regulation. This framing conflates all prediction market use cases (sports betting, election forecasting, governance markets) under a single federal-vs-state jurisdiction question, making it impossible to separate futarchy governance from gambling perception in the legal discourse.


## Extending Evidence

**Source:** Rio original analysis, April 2026

MetaDAO's TWAP settlement mechanism may provide a structural defense beyond use-case distinction: state enforcement actions target 'event contracts' settling on external outcomes, but MetaDAO's markets settle on endogenous token price (TWAP over 3-day window). This creates a mechanism-based exclusion from the 'event contract' category rather than relying on governance vs. gambling framing. The regulatory vacuum this creates (not state enforcement target, not CFTC-regulated DCM, potentially not SEC security) suggests the conflation risk may be lower for TWAP-settled conditional markets than for traditional prediction markets.


## Challenging Evidence

**Source:** Rio original analysis, CEA Section 5c(c)(5)(C) interpretation, April 2026

Original structural analysis suggests MetaDAO conditional governance markets may be categorically distinct from 'event contracts' under CEA Section 5c(c)(5)(C) because TWAP settlement against endogenous token price signals—rather than external observable events—creates self-referential circularity that may place them outside the gambling framework entirely. Zero documented enforcement actions, CFTC proceedings, or legal analyses across 29 tracking sessions have addressed TWAP-settled governance markets, suggesting either a blind spot in legal discourse or silent resolution. This challenges the conflation risk by identifying a structural mechanism that may separate governance markets from event betting at the statutory definition level.


## Extending Evidence

**Source:** David Miller remarks at NYU Law School, March 31, 2026; CNN staffing data February 2026

CFTC Enforcement Director Miller's five priorities (March 2026) focus exclusively on DCM-registered platform conduct with zero mention of governance markets or decentralized protocols, confirming that enforcement attention is bounded to the centralized platform zone. The 24% staff reduction and Chicago office elimination create a structural capacity constraint that prevents enforcement expansion even if policy priorities shifted.


## Supporting Evidence

**Source:** Third Circuit Kalshi v. New Jersey dissent, April 7, 2026

Judge Roth's dissent argued Kalshi's offerings 'are virtually indistinguishable from the betting products available on online sportsbooks,' providing the strongest judicial articulation of the substance-over-form argument that conflates prediction markets with gambling


## Extending Evidence

**Source:** CNN Politics 2026-04-26, CFTC Director of Enforcement David Miller

CFTC Director of Enforcement David Miller's five enforcement priorities (insider trading in prediction markets, market manipulation in energy markets, market abuse/disruptive trading, retail fraud/Ponzi schemes, AML/KYC violations) contain zero mention of decentralized governance protocols, on-chain futarchy markets, or novel regulatory theories. This is not just policy discourse conflation but documented enforcement priority allocation—governance markets are not on the enforcement radar even as the agency expands prediction market oversight.


## Supporting Evidence

**Source:** HPC ANPRM comment, April 30, 2026

HPC's ANPRM comment demonstrates that even sophisticated advocacy organizations with direct financial interest in regulatory clarity treat all prediction markets identically. The comment advocates for accommodating decentralized platforms but makes no functional distinction between event-betting (sports/elections) and governance markets (organizational decision-making). This confirms the conflation exists at the advocacy level, not just in regulatory frameworks.


## Supporting Evidence

**Source:** BettorsInsider/Norton Rose/Epstein Becker/ZwillGen pre-argument coverage synthesis (May 3, 2026)

Massachusetts SJC oral argument (May 4, 2026) represents the highest-scrutiny prediction market legal proceeding in US history. Comprehensive review of pre-argument record across all major sources (CFTC amicus brief, 38-state AG coalition brief, ZwillGen, Norton Rose Fulbright, Epstein Becker Green, CFTC March 2026 ANPRM with 800+ comments, full 19-lawsuit litigation ecosystem across 5 states) confirms zero governance market mentions. Session 35 of continuous tracking shows no legal commentator, law firm, academic, journalist, or regulator has distinguished governance/decision markets from sports event contracts. The governance market gap persists at maximum pre-argument scrutiny.


## Challenging Evidence

**Source:** Third Circuit majority and dissent, KalshiEX v. Flaherty (2026)

The Third Circuit's swap classification provides a potential escape from gambling frameworks by reclassifying governance markets as financial derivatives. If conditional governance markets are swaps under CEA Section 1a(47)(A), they would have federal (CFTC) jurisdiction and protection from state gaming enforcement. However, Judge Roth's dissent on Rule 40.11 creates a counterargument: if CFTC prohibits gaming contracts, products with gaming characteristics might be excluded from swap protection.


## Extending Evidence

**Source:** Cleary Gottlieb, March 2026

Cleary Gottlieb's comprehensive prediction market regulatory analysis 'contains no analysis of DAO governance markets or blockchain-based conditional markets as security-based swaps.' The CFTC ANPRM includes inquiry into 'whether there are any considerations specific to blockchain-based markets' but no substantive treatment. This confirms the governance market gap extends to SEC-focused securities practitioners, not just CFTC-focused commodity practitioners.


## Challenging Evidence

**Source:** David Miller, CFTC Enforcement Director remarks, March 31, 2026; law firm alert synthesis

CFTC Enforcement Director Miller's March 31, 2026 priorities speech at NYU Law focused exclusively on insider trading in prediction markets at DCM-registered platforms, with zero mention of governance markets, decision markets, or futarchy across the primary source and six major law firm alerts (Sullivan & Cromwell, Skadden, Morrison Foerster, Davis Polk, Latham, Paul Weiss). The enforcement framework is bounded to (1) DCM-registered platforms and (2) trading on material non-public information about external event outcomes. This suggests governance markets settling against endogenous TWAP are outside the stated enforcement perimeter on both dimensions.
