The Commission's proposal on event contracts, published in the Federal Register on 12 June 2026 as Prediction Markets; Public Interest Determinations (RIN 3038-AF65), does something the category had asked for since the litigation began. It says in writing that political elections are not gaming, and neither are the Nobel Prize or the Academy Awards. The comment period closed on 27 July 2026 and, as of 27 August 2026, no final rule has been published.
The reading that spread fastest was the reassuring one. If election contracts are not gaming, they are not caught by the Special Rule in section 5c(c)(5)(C) of the Commodity Exchange Act (7 U.S.C. 7a-2(c)(5)(C)), and the review apparatus that comes with it does not apply. That is correct, and it goes less far than most people think: the same paragraph that lets those contracts out of the review also lets them out of the only list of quality factors the Commission has written down for anything in this category. We covered the definition itself in The Gaming Definition Is a Measuring Stick, Not a Threat. This is the other half: everything it pushes away, and what is waiting there.
The word doing the work is not in the rule text
Proposed section 40.11(b)(1) defines gaming as any activity that participants typically engage in for recreation or to entertain others, that is governed by rules, and that includes measurable occurrences or outcomes depending on the participants' luck, skill, or athletic ability during the activity. All three must be present. The interesting part sits directly underneath. Paragraph 40.11(b)(2) of the proposed rule text reads, in full, [Reserved]. There is no companion definition of a contest in the operative rule. The definitions paragraph of the new Appendix F to part 40 defines four terms, and contest is not among them: Enumerated Activity, event contract, prediction market and Special Rule.
The word appears as a defined term once, in Appendix F paragraph (d)(4), and the definition opens by limiting its own reach: "In this paragraph (d), the term 'contest' refers to an activity where participants compete for a prize, honor, award or position based on their qualifications or merit displayed in general or over an extended period. These contests are not gaming."
So the distinction carrying election and award markets out of the Special Rule lives in one sentence, in an appendix, scoped by its own terms to the paragraph it sits in. That is not a reason to distrust it, but a reason to notice how much weight a single sentence carries, and that the reserved slot beneath the gaming definition is where a future Commission could put something firmer.
Merit over an extended period is where the line sits
The Commission works through its own examples, and the reasoning is not the reasoning most people assume. On elections, the proposal says they typically serve the purpose of selecting political leadership rather than recreation or entertainment, and that their outcomes turn on voters' judgment about who should hold office, informed by considerations beyond the discrete election period. On the Nobel Prize and the Academy Awards, it says the outcome depends on electors' judgment about who should receive an award, based on a range of considerations beyond the participants' luck, skill or athletic ability displayed during the contest.
Notice what is not doing the work: not seriousness, and not the presence of money. It is the location and the timeframe of the judgment. A game resolves on what happened inside it. A contest resolves on an assessment made from outside, about performance stretching beyond any single event. That test is observable, so an exchange can run it on its own book without waiting for anyone.
One baseball season produces one contest and one game
The clearest illustration is the one the Commission puts third. The Cy Young Award, presented annually by the Baseball Writers' Association of America, is not gaming, because the outcome is determined by a panel of voters assessing overall performance without being strictly limited to occurrences in any game or games. Athletic performance is all over it and changes nothing. In the next sentence the Commission takes the same sport, season and players and reaches the opposite result: a contract on which pitcher records the most strikeouts in a season is gaming, because it settles on a measurable outcome of skill and athletic ability in games.
Figure skating gets the same treatment: the competition is gaming, while an award of "figure skater of the year," decided by a panel assessing the best overall ability over the past year, is a contest. The Commission then extends this to automated resolution, which matters more than it looks: an algorithm reading only skill and ability during the activity produces gaming, and one weighing other factors does not. Classification can therefore turn on the inputs to a model the venue did not build. If your settlement source is a third party's index, what that index reads stops being a data quality question and becomes a scoping question.
What happens around a game is not what happens in it
Paragraph (d)(5) confirms that trading on a contest does not turn it into a game: the character of the underlying event is fixed before your contract exists. Paragraph (d)(6) draws the boundary from the other side, with examples worth pinning above a listing committee's desk. A contract on whether a football player scores a certain number of touchdowns involves gaming; one on attendance at that same match does not, because settlement is determined by ticket-purchasing decisions. Whether an athlete wins an Olympic gold medal involves gaming; which city will host a future Games does not, because settlement turns on the International Olympic Committee's host-selection decision. Gaming includes events happening in games but not events occurring around them, so two contracts can name the same stadium on the same afternoon and sit in different regulatory worlds.
A second definition is waiting in the same document
Less noticed, and more consequential: the Commission put up an alternative definition of gaming for comment, built on different foundations. Under it, gaming would mean "an activity created by its rules, in which (1) all participants whose conduct determines the outcome operate within the activity itself, and (2) those participants, in their capacity as participants, have purposes that are defined by and internal to the activity itself."
The reasoning is structural rather than colloquial. Many activities are governed by rules without being created by them, and the Commission names driving, commerce, professional practice, parenting and warfare. Games are the opposite: football does not exist independently of football's rules and would cease to exist if they were abandoned. The Commission says it preliminarily believes this alternative may better capture the structural features of gaming. Anyone treating the contest exclusion as settled should register that the definition it rests on has a live competitor inside the same document. The Commission also asked directly whether game shows, reality show competitions, pageants and similar events should count as gaming, noting that music and talent competitions often resemble elections. Those are open questions in the docket, not answers.
Leaving the Special Rule means leaving its factor list behind
Here is where a classification note turns into an operating problem. The Special Rule review is where the proposal put all of its quality thinking. Section 40.11(a)(5) sets out factors applying to every contract in scope, and 40.11(a)(6) factors specific to particular enumerated activities. For gaming, the appendix names things worth having: an aggregate outcome rather than a single actor's discrete act, objectively verifiable settlement data, an established integrity framework in the competition, formal information sharing with the governing body, the venue's own surveillance. That list is a design brief.
Now look at where it leaves a contest. Appendix F paragraph (g) sets out public interest factors specific to the enumerated activities, and a contest is not an enumerated activity, so none of them reach it. Paragraph (e) then lists what the Commission believes generally falls outside the scope entirely, and the list is long: economic indicators from CPI to jobless claims, financial indicators from the federal funds rate to broad stock index values, foreign exchange rates, results of political elections and of political activities such as legislative votes and appointments, and results of honor and award contests including who will win or be nominated.
The appendix is careful to say those contracts remain subject to the statutory and regulatory requirements for listing event contracts, and Core Principle 3 still requires contracts not readily susceptible to manipulation. But the specific factor list, the one telling an exchange what a defensible contract in a given category looks like, was written for gaming and stops at its edge. The category with the most integrity guidance in the entire proposal is sport; the categories with none are elections, awards and everything in paragraph (e). That is not a loophole, it follows from a rule built around five enumerated activities. It does mean an exchange listing an election contract has no federal template to work against, and cannot point to one when asked why its contract is sound.
The categories outside gaming produced the first named insider case
If falling outside the gaming definition tracked lower risk, the summer of 2026 would have looked different. NPR reported on 13 August 2026, in a piece by Bobby Allyn, that federal regulators had opened an inquiry into so-called mention markets, contracts on what a speaker will or will not say. According to that reporting, President Trump's long-serving teleprompter operator used Kalshi to profit from bets on the words the president would use; Kalshi's own surveillance flagged the trades and reported them to federal authorities; and the exchange then removed mention markets from its sports offering. NPR notes that spokespeople for both Kalshi and the CFTC declined to comment.
Run a mention market through the definitions above. It is not gaming, since no activity engaged in for recreation produces the outcome, and not a contest either, since nobody competes for a prize on merit. It simply falls outside, and it fell outside while producing the most concretely identifiable insider problem the category has had. A very small number of people knew the script. That is the profile we described in Inside Information Is Not a Side Issue: a settlement source controlled by an identifiable handful of people with no market-facing duty. Worth saying plainly, because it cuts the right way, the exchange's surveillance caught it and reported it. That is Directive 01 and Directive 02 running in a category with no regulatory checklist behind it.
Election contracts carry a related exposure that no factor list addresses. Votebeat reported on 10 August 2026, in an article by Carrie Levine, that election officials have begun raising concerns about these markets. Dean Logan, the Los Angeles County Registrar-Recorder and County Clerk, described early returns in the June mayoral primary diverging from market expectations and said the result was suspicion and questioning of normal ballot processing. Jim Allen, elections director in Delaware County, Pennsylvania, drew a comparison with corruption in sport when discussing poll workers trading on these markets. Here the settlement source is administered by tens of thousands of local officials, and nothing in the proposal speaks to that, because it stopped speaking about elections the moment it classified them as contests.
No state adopted the contest distinction
The classification also does not travel, which we set out in Two Courts, Two Answers. On 13 August 2026 a King County Superior Court judge ordered KalshiEX to stop offering a list of categories in Washington state, per the announcement from the Washington Attorney General's office. The categories were reported by OPB, which listed sports, elections and politics, entertainment, culture, tech and science, and mentions as blocked, while commodities, climate, economics and finance continued.
Read that against Appendix F. Washington switched off families the federal proposal treats as outside gaming and left running the economic indicators paragraph (e) also lists as outside scope. The state was not sorting by the federal test, but by something closer to public salience. This is Directive 05 in its plainest form: standards are set against the jurisdiction that regulates next.
What a venue should be able to show about a contest contract
None of this argues for delisting election or award contracts. They are among the most defensible things in the category on the merits, and the Commission is right that they are not games. The argument is that being outside the Special Rule puts the burden of showing they are sound entirely on the venue, and nobody else will draft the questions. Four we would want answered on paper:
- Who decides, and what do they read? Name the deciding body and the considerations it weighs. Where resolution runs through an index or model, state whether it reads only in-activity performance, since the proposal makes that decisive.
- Who has the answer before the market does? For a contest resolved by a panel or an electorate, list the people with early access, and say what your restricted participant list covers.
- What does your surveillance look for here? The gaming factors assume an integrity framework in the underlying competition. Award bodies rarely maintain one for your benefit and electorates never do, so the monitoring is yours to design and describe.
- What happens if the classification moves? The reserved paragraph, the alternative definition and the open questions about game shows are all live. Resolution terms should survive a contract being reclassified mid-life.
None of these require a rule to be final, and none of the classifications hold outside the United States, as we set out in There Is No Passport for a Prediction Market in Europe.
A classification tells you which questions nobody will ask you
The contest exclusion is good drafting and, in our view, the right result. Elections are not games, awards are not games, and the Commission untangling its own earlier reasoning in public beats the category getting that answer from a court.
What it is not is a verdict about quality. Being inside the Special Rule means an exchange gets asked hard questions on a schedule, with a written factor list and a right to answer, which we covered in The Right to Respond Is Only Worth What You Can File. Being outside it means those questions do not arrive, and the contract still has to be worth listing. The docket CFTC-2026-1189 on regulations.gov held 1,393 comments as of 27 August 2026, and the boundary is still being argued inside it.
A venue whose defence of its own book is that a rule does not reach it has not made an argument about the book. The standard worth having is the one you can state before anyone requires it, and it is the same whichever paragraph you turn out to be in. If your venue already works this way, the public commitment is where you say so.