Federal regulators on Wednesday unveiled a sweeping proposal to establish new rules for the rapidly growing prediction markets industry as legal battles continue over whether the platforms constitute federally regulated financial markets or state-regulated gambling.

The Commodity Futures Trading Commission, which oversees U.S. derivatives markets, released a 267-page notice of proposed rulemaking outlining what types of event contracts would be permitted under federal law. The proposal comes as prediction market platforms such as Kalshi and Polymarket face scrutiny from state regulators, lawmakers, and gambling authorities over the real-world events on which users can place wagers.