The United States Commodity Futures Trading Commission (CFTC) is an independent agency of the United States federal government. Created in 1974, the commission regulates the United States derivatives markets, which includes futures, swaps, and certain kinds of options.
The Commodity Exchange Act (CEA), et seq., prohibits fraudulent conduct in the trading of futures, swaps, and other derivatives. The stated mission of the CFTC is to promote the integrity, resilience, and vibrancy of the U.S. derivatives markets through sound regulation. After the 2008 financial crisis and since 2010 with the Dodd–Frank Wall Street Reform and Consumer Protection Act, the CFTC has been transitioning to bring more transparency and sound regulation to the multitrillion-dollar swaps market.
The agency was accused during the second Trump administration of weak regulation and even obstructing investigations into prediction markets and cryptocurrency businesses, two industries closely tied with the Trump family businesses. The reporting suggested that the agency had been made ineffective.
History
Futures contracts for agricultural commodities have been traded in the U.S. for more than 150 years and have been under federal regulation since the 1920s.See the Futures Trading Act of 1921, Declared unconstitutional in Hill v. Wallace 259 U.S. 44 (1922), the Grain Futures Act of 1922 and Board of Trade of City of Chicago v. Olsen 262 US 1 (1923). The Grain Futures Act of 1922 set the basic authority and was changed by the Commodity Exchange Act of 1936 (7 U.S.C. 1 et seq.).
Since the 1970s, trading in futures contracts has rapidly expanded beyond traditional physical and agricultural commodities into a vast array of financial instruments, including foreign currencies, U.S. and foreign government securities, and U.S. and foreign stock indices.
Congress created the CFTC in 1974 as an independent federal regulatory agency. The Commodity Futures Trading Commission Act of 1974 (P.L. 93-463) created the CFTC to replace the U.S. Department of Agriculture's Commodity Exchange Authority. The Act made extensive changes to the Commodity Exchange Act (CEA) of 1936, which itself amended the original Grain Futures Act of 1922. (7 U.S.C. 1 et seq.). In 1975, the first members were selected, and William T. Bagley became its first chairman.
The CFTC's mandate was renewed and expanded in December 2000 when Congress passed the Commodity Futures Modernization Act of 2000, which instructed the Securities and Exchange Commission (SEC) and the CFTC to develop a joint regulatory regime for single-stock futures, the products of which began trading in November 2002.
In 2010, the Dodd–Frank Wall Street Reform and Consumer Protection Act expanded the CFTC's regulatory authority into the swaps markets. The swaps markets currently have a notional value of more than $400 trillion.
The CFTC had 760 employees at its peak in 2015, but approximately 550 by March 2026.
Under the second Donald Trump administration, the CFTC workforce was cut by a quarter by April 2026. The agency was at its smallest size in 15 years. These cuts happened amid major controversies surrounding suspected insider trading on betting markets (such as Kalshi and Polymarket), as well as suspicious trades related to world politics; issues that the CFTC would be involved in regulating. The CFTC sharply curtailed regulatory enforcement against cryptocurrency companies and prediction markets. Within the first two years of the second Trump administration, the CFTC announced no new enforcement cases against major cryptocurrency firms, which stands in contrast to the more than 80 cases pursued by the CFTC under the Joe Biden administration. The lax enforcement of cryptocurrency firms and predictions took place under the leadership of CFTC chair Caroline Pham and CFTC senior counsel Brigitte Weyls, both of whom immediately went to work for cryptocurrency companies and prediction markets after leaving the CFTC. According to a May 2026 report in The New York Times, two officials who raised questions about three regulated prediction market companies' ties to the Trump family's business empire were placed on leave, barred from their offices and placed under internal investigation. Three other officials trying to enforce cryptocurrency laws were also removed from office. The Times' reporting concluded that the agency was being "steamrolled by industries it regulates".
Regulated markets
The CFTC oversees the derivatives markets by encouraging their competitiveness and efficiency, ensuring their integrity, protecting market participants against manipulation, abusive trading practices, fraud, and ensuring the financial integrity of the clearing process. The CFTC generally does not directly regulate the safety and soundness of individual firms, with the exception of newly regulated swap dealers and major swap participants, for whom it sets capital standards pursuant to Dodd–Frank. Through oversight, the CFTC enables the derivatives markets to serve the function of price discovery and offsetting price risk.
As of 2014 the CFTC oversees 'designated contract markets' (DCMs) or exchanges, swap execution facilities (SEFs), derivatives clearing organizations, swap data repositories (SDRs), swap dealers, futures commission merchants, commodity pool operators and other intermediaries. The CFTC coordinates its work with foreign regulators, such as its UK counterpart, the Financial Conduct Authority, which supervises the London Metal Exchange.
Over-the-counter derivatives
In 1998 CFTC chairperson Brooksley E. Born lobbied Congress and the President to give the CFTC oversight of 'off-exchange markets' for over-the-counter (OTC) derivatives in addition to its existing oversight of exchange-traded derivatives,"Concept Release Concerning Over-The-Counter Derivatives market", CFTC Release #4142-98, May 7, 1998. but her warnings were opposed by other regulators.
Two actions by the CFTC in 1998 led some market participants to express concerns that the CFTC might modify the "Swap Exemption" and attempt to impose new regulations on the swaps market. First, in a February 1998 comment letter addressing the SEC's "broker-dealer lite" proposal, the CFTC stated that the SEC's proposal would create the potential for conflict with the Commodity Exchange Act (CEA) to the extent that certain OTC derivative instruments fall within the ambit of the CEA and are subject to the exclusive statutory authority of the CFTC.Letter from Jean A. Webb, Secretary, CFTC, to Jonathan G. Katz, Secretary, SEC (February 26, 1998).
In May 1998 the CFTC issued a 'concept release' requesting comment on whether regulation of OTC derivatives markets was appropriate and, if so, what form such regulation should take.Over-the-Counter Derivatives, 63 Fed. Reg. 26,114 (May 12, 1998). Legislation enacted in 1999 at the request of the US Treasury, the Federal Reserve Board, and the SEC limited the CFTC's rulemaking authority with respect to swaps and hybrid instruments until March 30, 1999, and froze the pre-existing legal status of swap agreements and hybrid instruments entered into in reliance on the 'Swap Exemption', the 'Hybrid Instrument Rule', the 'Swap Policy Statement, or the 'Hybrid Interpretation'. The text of that act read: "...the Commission may not propose or issue any rule or regulation, or issue any interpretation or policy statement, that restricts or regulates activity in a qualifying hybrid instrument or swap agreement". Shortly after Congress had passed this legislation prohibiting CFTC from regulating derivatives, Born resigned. She later commented the failure of Long-Term Capital Management and the subsequent bailout as being indicative what she had been trying to prevent.Born was the focus of an October 2009 Frontline documentary titled "The Warning" and was also chronicled in the documentary Inside Job. The two films recount her attempts to investigate and regulate the OTC derivatives market (PBS Frontline The Warning)
Regulating digital currencies In March 2014 the CFTC acknowledged it was considering the regulation of Bitcoin. The CFTC has since taken the position that Bitcoin is a commodity under the CEA. In October 2019, former CFTC Chairman Heath Tarbert, now Chief Legal Officer of Citadel Securities, declared that ether was also a commodity under the CEA.
In 2015, the CFTC ruled that for purposes of trading, cryptocurrencies were legally classified as commodities. However, in view of market volatility and other factors, the CFTC noted several risks associated with trading virtual currencies. In 2017, the CFTC cited the US SEC's warning against digital token sales and initial coin offerings (ICOs) that can "improperly entice investors with promises of high returns". In recent years, the CFTC has expanded its efforts to civilly prosecute fraud and misappropriation in the digital asset markets.
History and Regulation of Prediction Markets (2020-2026)
In the early 2020s, the CFTC's regulatory scope underwent a significant transformation as prediction markets transitioned from niche academic platforms to mainstream financial venues. This era was defined by the rapid growth of "event contracts" derivatives that allow retail participants to trade on the outcome of real world events ranging from elections to sporting results.
Emergence of Kalshi and Polymarket The modern era of consumer prediction markets began with the launch of Kalshi in 2021, which became the first "Designated Contract Market" (DCM) dedicated to event contracts. Unlike earlier platforms like PredictIt, which operated under restrictive "no-action" letters for academic purposes, Kalshi sought full federal registration to offer legally cleared contracts to the general public.
Concurrently, Polymarket, a decentralized platform based on the Polygon network, gained massive global traction. In January 2022, the CFTC issued a landmark enforcement action against Polymarket, fining the company $1.4 million and ordering it to wind down its U.S. operations for failing to register as a DCM. This forced Polymarket to "geo-block" U.S. users for nearly four years, even as it became the world's largest prediction market by volume, processing over $20 billion in cumulative trades by late 2025.
Expansion of CFTC Oversight and Legal Challenges Between 2023 and 2025, the CFTC significantly expanded its oversight, though its authority was frequently challenged in federal court. In 2023, the Commission attempted to block Kalshi from offering contracts on U.S. congressional control, arguing that such contracts constituted "gaming" and were contrary to the public interest. However, in a 2024 ruling in KalshiEX LLC v. CFTC, the U.S. District Court for the District of Columbia ruled that the CFTC had exceeded its statutory authority, holding that political events did not inherently constitute "gaming" under the Commodity Exchange Act.
Following this victory, prediction markets expanded aggressively into sports betting, climate change, and economic indicators. By late 2025, the CFTC shifted toward a "deregulatory pivot" under new leadership, dropping its appeal in the Kalshi case and clearing the way for Polymarket to re-enter the U.S. market through a registered intermediary.
Growth and Institutional Adoption The prediction market sector grew over 130-fold between 2024 and 2025, with monthly volumes reaching $13 billion by the end of 2025. Major financial firms including Robinhood, Webull, and Interactive Brokers integrated Kalshi's event contracts into their platforms, making prediction trading as accessible to retail investors as traditional stock trading.