Three letters reached the Commodity Futures Trading Commission in 2026 asking it to do something about prediction markets. Seven members of the House of Representatives wrote in April about contracts on military operations. The largest CFTC registered exchange filed a comment at the end of that month asking for sustained enforcement against venues outside the federal perimeter. Two senators wrote in June asking what consumer protection standards the Commission actually imposes on the category.
The three sets of writers agree on very little. They share a structure. Each letter asks the regulator to constrain conduct the writer does not control, and none of them puts the writer under an obligation. That is not a criticism of any of them, because all three are legitimate uses of a public process that exists for exactly this. It is an observation about what the public record contains and what it still does not: a document in which the category writes down, in its own name, what it will do whether or not the Commission ever acts.
The exchange asked for enforcement against a model, not against a name
On 30 April 2026 Kalshi Inc. filed a thirty one page comment letter with the Secretary of the Commission, signed by co-founder and chief operating officer Luana Lopes Lara. It answers all forty questions in the Advance Notice of Proposed Rulemaking that the Commission published in the Federal Register on 16 March 2026 under RIN 3038-AF65, and it sits in the public docket as comment CFTC-2026-0331-3396 on regulations.gov.
Question 36 of that notice asked whether anything significantly similar to an event contract trades somewhere other than a designated contract market or a swap execution facility. The letter answers with the offshore ecosystem, and the description is precise rather than rhetorical: centralised order books, retail access, fixed unit binary payoffs, resolution by a third party source, and category overlap across politics, economics, weather, sports and entertainment, with none of the Core Principle obligations, none of the customer fund segregation and none of the swap data reporting that a registered venue carries. Then comes the ask. The Commission, Lopes Lara writes, "should also commit to sustained enforcement against offshore platforms that solicit or tolerate U.S. participation", because terms of service exclusions and address based blocking "are circumvented daily", and it should "make clear that the offshore-platform model is not a viable workaround to U.S. derivatives regulation".
Here is the part that most summaries of this letter miss. In thirty one pages it never names a competitor. Not once. The ask is aimed at a business model, and the only company it identifies by name is the one the Commission has already sanctioned for running it. That is a materially better ask than a complaint about a rival, and it deserves to be described accurately.
The precedent the letter leans on is In re iFinex Inc., CFTC Docket No. 22-05, the settled order the Commission entered on 15 October 2021 against the British Virgin Islands entities operating the Bitfinex platform. The order itself is worth reading rather than paraphrasing, because one finding does the work. The Commission found that Bitfinex customer service representatives encouraged customers based in the United States to use a virtual private network to mask their address, and it quotes a representative telling a U.S. customer on or about 3 April 2018 that the platform is "not against VPNs . . . by any means". The respondents paid a 1.5 million dollar civil monetary penalty and were ordered to cease and desist from violating sections 4(a) and 4d(a)(1) of the Commodity Exchange Act, 7 U.S.C. sections 6(a) and 6d(a)(1). The authority Kalshi asks the Commission to use is real, it has a docket number, and it has been used.
Half of that argument came back in the proposed rule
On 12 June 2026 the Commission published Prediction Markets; Public Interest Determinations, the proposal that would rewrite Regulation 40.11. The word offshore appears in it twelve times, and every appearance lands on the same side of the ledger. Barring a contract from a registered venue is unlikely to eliminate demand for it and "may divert trading to offshore or otherwise less transparent and less supervised markets". Competitive pressure from offshore platforms "may also create incentives for domestic prediction markets to list higher-risk products". Offshore migration is a cost of restriction, and the Commission counts it that way in the cost and benefit discussion.
What the proposal never does is propose, discuss or invite comment on enforcement against those venues. The single enforcement reference involving an unregistered platform in the whole document points at a user rather than at a venue: a footnote citing CFTC Press Release No. 9217-26 of 23 April 2026, in which the Commission charged a U.S. service member with insider trading in event contracts on an unregistered platform.
Whether the Commission read the Kalshi letter and took half of it, or reached the migration point on its own, is not something the document says, and we are not going to guess. The pattern is worth naming anyway, because it is the ordinary result of asking a regulator for relief instead of publishing a standard. The half of the argument that widens what a registered exchange may list survived into the proposed rule. The half that would have placed an obligation on anybody did not.
Two senators asked which standards exist, and listed the six that matter
On 25 June 2026 Senators John Curtis and Adam Schiff wrote to Chairman Michael S. Selig with six questions and asked for written answers by 10 July 2026. The letter was prompted by an investigation in The Wall Street Journal by Katherine Long, Caitlin Ostroff, Neil Mehta and Brenna T. Smith, which reported that Polymarket paid social media creators to film trades on websites built to resemble the platform, that the trades shown were not real, and that many creators did not disclose that they had been paid. Those are allegations, and the company did not dispute the account in public. CBS News reporter Mary Cunningham reported on 26 June 2026 that a Polymarket spokesperson said the company was "conducting a comprehensive audit of active promotional content to ensure it complies with our standards, as well as applicable regulatory and legal disclosure requirements".
The letter's fourth question is the one that matters for anybody building a product rather than following a dispute. It asks which consumer protection standards the Commission requires of prediction market operators "with respect to advertising, age verification, addiction warnings, responsible-gaming tools, affiliate marketing, and influencer disclosures".
That is a list of six conduct surfaces, and as of 5 September 2026 there is no CFTC rule that covers them. Chairman Selig described amendments to parts 38 and 40 carrying consumer protection requirements at the Innovation Advisory Committee meeting on 20 August 2026, and as we wrote at the time, that rule exists as a paragraph of a speech and nothing more. A senator asking a regulator which standards apply, and the honest answer being none yet, is the clearest description of the gap this initiative was founded to close. It is Directive 04 stated as a congressional question: "A first-time user learns what a price means, how a spread costs them money and how their market resolves before they learn how to deposit faster."
The first of the three letters was about war
The earliest of the three came on 7 April 2026, when Representatives Seth Moulton and Jim McGovern, joined by Greg Casar, Jamie Raskin, Dina Titus, Gabe Amo and Yassamin Ansari, demanded that Chairman Selig explain why the Commission had not acted against offshore platforms carrying wagers on United States military operations. Moulton called it "morally corrupt and completely unacceptable for these platforms to allow people to bet on whether American service members live or die".
Read next to the exchange's comment letter, that request is the same request in a different register. Both identify conduct at an unregistered venue. Both ask the Commission to reach it. Neither describes what a listing committee at a registered venue should do the next time a contract of that shape is proposed, which is the decision that actually determines whether such a market opens.
The Commission does bring this kind of case
None of this is a story about a regulator that cannot act. On 29 June 2026 the Commission ordered Netrios LP Ltd. and Red Acre Ltd. to pay 1.75 million and 750,000 dollars for their part in illegal off-exchange leveraged retail commodity transactions involving United States customers on offshore platforms, with assistance from authorities in Ireland, Seychelles and Malta. And the Commission has reached a prediction market operator before: on 3 January 2022 it ordered the operator then trading as Blockratize to pay a 1.4 million dollar penalty, wind down non-compliant markets and cease violating the Act.
So the tool exists, the Commission uses it, and it has used it in this category. What the public record does not contain, through the Commission's press releases up to release 9293-26 issued on 2 September 2026, is an announced enforcement action against an offshore prediction market venue in response to any of the three letters. That is a statement about a public record on a date, not a prediction about what comes next.
What all three letters describe is one missing document
Put the three side by side and the common shape is hard to miss. A competitor asks for enforcement against a category of venue. Legislators ask why enforcement has not happened. Senators ask which rules apply. Every one of those is a request addressed upward, about somebody else, and every one of them can be fully satisfied without the writer changing a single line of its own product.
A written standard does three things a letter structurally cannot. It binds the person who publishes it, which is why it is worth reading. It can be tested by a counterparty, an auditor or a state attorney general before any federal rule arrives. And it survives the outcome of the jurisdictional fight in either direction, because it does not depend on who wins. That is what Directive 05 means when it says that "standards are set against the jurisdiction that regulates next, not only the one that has not yet".
There is a version of this category in which the answer to the senators' fourth question is not "the Commission requires nothing yet" but "here is what the venues publish, and here is where you can check it". Nothing in the law prevents that document from existing on any given morning. What prevents it is that writing it costs the author something, and writing a letter does not.
What we would put in writing this month
None of the following needs a rulemaking, a court, or anyone's permission. Each of them answers a question that one of the three letters actually asked.
- Promotional conduct. No marketing material depicts a trade that was not placed. Paid creators are labelled at the point of the post rather than in a profile. Any displayed win is shown with the result distribution of the same position, so that a viewer sees the shape of the outcome and not one tail of it. That answers the senators' third question before it is asked again.
- The intermediary perimeter. Publish who is paid to bring users in and on what terms. The surface between an exchange and a first-time user is mostly built by other people, which is the point we made about the display layer and the affiliate perimeter in August 2026.
- Geographic access, stated operationally. If a venue says it is not available to persons in a jurisdiction, publish what that means in practice: the method, the measured failure rate, and what happens to a position that was opened from a blocked jurisdiction before the block caught it. Directive 02 asks for custody, settlement sources and conflicts in plain language on the surface where the trade happens, and access belongs in that list.
- Protection tooling, as a status report. State which of deposit limits, cool-off periods and self-exclusion exist as account features today and which do not. Directive 03 treats them as product features rather than concessions granted on request, and an honest "not yet" is more useful to a reader than silence.
- A signature. A named person with a role, so the document can be held against someone the way a comment letter is.
The Commission will answer the jurisdictional question eventually, in a rule or in a courtroom, and the answer will apply to every venue that is still standing. The interval before that happens is the only period in which this category can decide for itself what the answer looks like. Three letters have now used part of that interval to describe the problem accurately. The document that fixes it has still not been written by anyone whose own product it would bind.