ProphetX secures CFTC approval for prediction market operations
ProphetX has announced that it received approval from the US Commodity Futures Trading Commission (CFTC) to operate as both a Designated Contract Market (DCM) and a Derivatives Clearing Organisation (DCO).
The approval allows the company to transition from its previous sports betting exchange and sweepstakes-based model into a federally regulated sports prediction market. Under the new structure, ProphetX will be able to offer event-based trading products under federal oversight, supporting a potential nationwide expansion.
The move comes as prediction markets continue to gain traction in the United States, creating competition with traditional state-regulated sportsbooks. Unlike sports betting operators that are regulated at the state level, prediction market platforms operate under federal commodities regulations.
ProphetX said the approvals position the company to enter the growing event-trading sector and expand its sports-focused prediction market offerings across the U.S.
ProphetX’s ongoing evolution
ProphetX has shifted its business model several times in response to changing regulations. It began as Prophet Exchange, a peer-to-peer sports betting platform where users competed directly against each other rather than against the house. As rules tightened, the company moved into sweepstakes, allowing users to buy tokens that doubled as entries for prizes, but this approach drew increasing scrutiny from state regulators.
ProphetX intends to transfer platforms by early next week, pausing all activity while it converts from a sweepstakes to a federally regulated sports prediction market platform. Existing users will not have to take any action because their accounts and balances will be immediately transferred to the new system. The move is part of the general trend that is emerging in the prediction market space as other businesses, such as Novig and Sporttrade, apply for approval from the CFTC.
CFTC posts new rules
The landscape of US prediction markets has taken a major regulatory turn following the CFTC’s highly anticipated proposed framework. The official publication has generated a 45-day period for the public to provide comments on how this multi-billion-dollar event contract business should be regulated.
The CFTC’s latest principles-based plan, announced under the leadership of its chairman, Michael Selig, represents a significant shift away from previous regulatory suspicion and towards a more formal permissive stance. According to the draft regulation, the CFTC distinguishes between pure luck games and sports-related transactions. According to the CFTC, collective sports results (including totals, wins and losses, and point spread betting) on exchanges like Kalshi and Polymarket do not violate public interests because they serve the aim of price discovery and information.
However, the plan takes a stringent position against manipulation-prone bets and bets against policies, banning outright all event wagers based on athlete injuries, referee rulings, wars, and terrorism. At the same time, the policy emphasises the notion that election bets should be treated as competitions and not gambling.
Whereas the industry appreciates this clarification from the federal government, the road ahead continues to be mired in the same jurisdictional uncertainty. At present, the CFTC is facing lawsuits from numerous state attorneys general who argue that these platforms infringe upon state-level gambling laws and lack adequate consumer protections. Finally, it appears that the Supreme Court will rule whether prediction markets can provide sports contracts.
Future of prediction market
Competition in the US prediction market space is rising fast, especially since the CFTC started to approve sports contracts shortly after President Trump’s inauguration in early 2025. Kalshi currently holds the largest market share in the US, controlling approximately 90 percent of domestic prediction market trading, according to a Bank of America analysis. However, competitors including Polymarket, DraftKings, Fanatics, and FanDuel are expected to gain ground as they expand their offerings. Sports markets represent the primary focus for trading activity, making up roughly 80 percent of Kalshi’s overall volume, which reflects the sector’s concentration in sports-related contracts.
At the same time, companies like Sporttrade, Novig, and ProphetX are seeking federal approval, being confident that the industry is capable of developing itself. The prediction platform can turn into a diverse ecosystem, where various players operate within particular niches, encouraging innovation and participation in the process.
Looking ahead, the industry will still be faced with regulatory issues, although consumer interest is growing. The accreditation of ProphetX signals greater acceptance of prediction markets in the financial and entertainment industries.
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