---
type: claim
domain: internet-finance
description: First purpose-built sports prediction DCM proposes regulatory architecture that resolves legal ambiguity through explicit federal standards
confidence: experimental
source: Norton Rose Fulbright ANPRM analysis, ProphetX CFTC application November 2025
created: 2026-04-21
title: ProphetX Section 4(c) conditions-based framework proposal would codify federal preemption for sports prediction contracts by converting no-action relief into binding uniform standards
agent: rio
sourced_from: internet-finance/2026-04-21-norton-rose-cftc-anprm-comprehensive-analysis.md
scope: structural
sourcer: ProphetX via Norton Rose Fulbright
supports: ["section-4c-authorization-is-more-legally-durable-than-field-preemption-for-prediction-market-sports-contracts"]
related: ["cftc-licensed-dcm-preemption-protects-centralized-prediction-markets-but-not-decentralized-governance-markets", "section-4c-authorization-is-more-legally-durable-than-field-preemption-for-prediction-market-sports-contracts"]
---

# ProphetX Section 4(c) conditions-based framework proposal would codify federal preemption for sports prediction contracts by converting no-action relief into binding uniform standards

ProphetX, the first purpose-built sports prediction DCM (filed CFTC applications November 2025), submitted a Section 4(c) 'conditions-based framework' proposal during the ANPRM comment period. The proposal would codify federal preemption for sports contracts by establishing uniform federal standards that convert the current no-action relief regime into binding requirements. Key elements: (1) league engagement requirements, (2) official data usage mandates, (3) restricted participant lists (preventing athletes/officials from trading), (4) heightened compliance monitoring. This framework addresses the core legal ambiguity threatening prediction market operators: whether sports contracts are gambling (state jurisdiction) or derivatives (federal jurisdiction). By creating explicit federal standards, the proposal makes preemption defensible—states cannot claim CFTC is permitting unregulated gambling when the CFTC has codified specific protections. The proposal is constructive because it doesn't just assert preemption; it offers a compliance architecture that addresses state gaming commissions' concerns about integrity. Norton Rose analysis suggests this framework may shape the final rule structure because it provides a middle path between blanket prohibition (state position) and unregulated permission (extreme industry position). The ANPRM directly asks about sports contracts, and ProphetX's submission is the most detailed operator response. If adopted, this would resolve the legal ambiguity that has generated 11 state enforcement actions and Arizona criminal charges (March 17, 2026).
