The proposal seeks to clarify which types of event contracts are considered "gaming" and therefore unsuitable for regulated exchanges.
This initiative comes amid a significant rise in the popularity of prediction markets, where users trade on the probability of real-world events.
Commissioners supporting the proposal argue that these markets pose risks to the integrity of democratic processes and lack a legitimate economic purpose for hedging.
The CFTC expressed concern that allowing financial stakes in elections could incentivize interference or provide a platform for speculative gambling rather than traditional commodity trading.
By formalizing these restrictions, the agency aims to prevent the commercialization of election results and ensure that regulated markets remain focused on conventional financial assets.
The proposed rule change follows years of legal battles and regulatory scrutiny involving various prediction platforms.
While proponents of these markets argue they provide valuable data and insights into public sentiment, the CFTC maintains that its mandate does not extend to overseeing or legitimizing electoral betting.
The proposal will now enter a public comment period, during which industry stakeholders and the public can provide feedback before a final version is considered for implementation.