---
type: source
title: "CFTC ANPRM on Prediction Markets — Law Firm Analyses and Futarchy Advocacy Gap"
author: "Multiple (Sidley Austin, Norton Rose Fulbright, Davis Wright Tremaine, Prokopiev Law)"
url: https://www.federalregister.gov/documents/2026/03/16/2026-05105/prediction-markets
date: 2026-03-16
domain: internet-finance
secondary_domains: []
format: thread
status: processed
priority: high
tags: [cftc, prediction-markets, futarchy, regulation, anprm, governance-markets, advocacy-gap]
---

## Content

The CFTC issued an Advance Notice of Proposed Rulemaking (ANPRM) on prediction markets on March 12, 2026. Published in the Federal Register March 16 (docket RIN 3038-AF65). Comment period closes April 30, 2026 (45 days).

**ANPRM scope:** 40+ questions covering:
- Manipulation susceptibility of prediction markets
- Settlement methodology and verifiability
- Insider trading risks in prediction markets
- Position limits and margin trading
- Blockchain-based prediction markets and operational risk
- DCM Core Principles applicability to event contracts
- Public interest determination criteria

**Industry context:** The ANPRM was issued as prediction markets grew to >$13B industry size. Polymarket CFTC-approved (2025 via QCX acquisition, $112M). Kalshi CFTC-regulated. 19+ federal lawsuits in the state-federal jurisdiction battle. 5c(c) Capital (March 23): VC fund backed by Polymarket CEO Shayne Coplan and Kalshi CEO Tarek Mansour, investing in prediction market companies.

**What the ANPRM does NOT address:**
Four major law firm analyses (Sidley Austin, Norton Rose Fulbright, Davis Wright Tremaine, Prokopiev Law) consistently note: **no mention of futarchy, DAO governance markets, corporate governance decision markets, or on-chain governance applications.** The ANPRM treats prediction markets as a uniform category spanning sports, elections, commodities, and economics.

**The futarchy classification gap:**

The ANPRM creates a de facto taxonomy: event contracts are regulated under the CEA as swaps or commodity options. Governance decision markets (which resolve endogenous organizational decisions, not exogenous events) could be classified as:
(a) Not event contracts (because the "event" is the organization's own decision — the contract is co-extensive with the decision)
(b) Event contracts on exogenous binary outcomes (same framework as sports/elections)

Without a futarchy-specific comment, (b) is the default. Under (b), MetaDAO governance markets face the same gaming classification risk as Kalshi election markets — the existential regulatory risk identified in Session 3.

**The advocacy gap as of March 25:** No entity has filed a futarchy-specific CFTC comment. Search of the regulations.gov docket shows no filings specifically addressing governance decision markets, DAO treasuries, or on-chain governance applications. Five major law firms mobilized by the ANPRM; none are representing futarchy interests.

**The argument for comment filing:**

Governance decision markets differ from event prediction contracts in:
1. **Structure:** They resolve endogenous decisions, not exogenous events. The "outcome" is determined by the organization, not independent reality.
2. **Function:** They coordinate joint ownership decisions, not information markets about external facts. The mechanism's purpose is governance, not prediction.
3. **Hedging utility:** Stakers in governance markets hedge their ownership interest in the organization. This is closer to corporate hedging (CFTC-regulated) than sports gambling (state-regulated).
4. **Harm profile:** The harms the state gaming laws protect against (addiction, fraud) are structurally different from the risks in governance markets (manipulation of organizational decisions, which has different regulation under corporate law).

**Institutional legitimization happening simultaneously:**

Truth Predict (Trump Media, March 2026): Trump's media company entering prediction markets. Signals mainstream political adoption but also potential for the "gambling" framing to dominate regulatory discourse if futarchy-specific advocacy is absent.

## Agent Notes
**Why this matters:** This is the most direct and time-bounded regulatory intervention opportunity in the KB. 36 days remain. No one is making the futarchy argument. The KB has spent 11 sessions documenting the gaming classification risk (Session 3 as primary concern) — this is the advocacy window to address it.

**What surprised me:** The total absence of futarchy from any of the law firm analyses is more striking than I expected. These are firms representing major crypto clients. The fact that none of them separately noted futarchy suggests either: (a) they don't know MetaDAO exists, (b) they don't consider governance markets materially different from event prediction, or (c) they have no futarchy clients. All three possibilities are concerning.

**What I expected but didn't find:** Any indication that MetaDAO, Robin Hanson, or Proph3t has submitted or is planning to submit a CFTC comment. META-036 (if it passed) would fund academic research that could inform such a comment, but the practical regulatory window closes before the research would complete.

**KB connections:**
- The gaming classification of prediction markets is the primary regulatory threat to futarchy governance — worse than the securities classification risk — this is the direct evidence that the gaming classification risk is unaddressed
- CFTC ANPRM regulatory analysis (Session 9 archive, if filed) — enrichment target
- Decentralized mechanism design creates regulatory defensibility (Belief #6) — the Howey analysis doesn't help here; the gaming classification requires a completely separate argument

**Extraction hints:**
1. CLAIM: CFTC ANPRM contains no futarchy-specific questions, creating default gaming classification risk for governance decision markets — high confidence, directly documented
2. CLAIM: Governance decision markets are structurally distinguishable from event prediction contracts on three dimensions (endogenous vs. exogenous resolution, coordination vs. information function, hedging utility vs. speculative) — needs development
3. ADVOCACY NOTE: This source documents the advocacy gap; the claim it generates may be more valuable as a position paper framework than as a KB claim

**Context:** The comment period represents the lowest-friction regulatory intervention. Pre-rule ANPRM is the stage where conceptual distinctions are drawn; once NPRM is issued, the framework is set and changing it requires countering an established proposal. The 2-3 year rulemaking timeline means whatever framework is set by comments will govern for many years.

## Curator Notes
PRIMARY CONNECTION: Gaming classification risk claim (identified in Sessions 2-3 as existential regulatory threat to futarchy)
WHY ARCHIVED: Documents the advocacy gap and closes the loop on the multi-session CFTC regulatory thread; actionable with 36 days remaining
EXTRACTION HINT: Extract as TWO claims: (1) the advocacy gap as an empirical fact, (2) the structural argument for distinguishing governance markets from event prediction — these are different claims with different confidence levels
