ProphetX seeks federal oversight as it shifts from sweepstakes to prediction markets

ProphetX has applied to become a federally regulated prediction market exchange, marking a strategic shift away from the increasingly constrained sweepstakes model toward regulation under the U.S. Commodity Futures Trading Commission (CFTC).

The move would enable ProphetX to operate nationwide under CFTC oversight, freeing it from the patchwork of state-by-state gaming rules that currently govern sweepstakes operators.

“We’re looking to take our prediction market and have it regulated by the CFTC, moving from the current sweepstakes vertical we operate in to one under CFTC oversight,” said Jake Benzaquen, ProphetX co-founder, in an interview with InGame.

Benzaquen said ProphetX expects to work with CFTC staff through 2026 to secure approval, describing the process as “ongoing and collaborative.” The company has filed its applications, but does not yet hold any licenses.

“We’ve filed our applications, which doesn’t mean we’ve obtained licenses yet. We’re already working with the CFTC, meeting with them to introduce our business and our team,” he added.

The timing coincides with a rapid tightening of regulations around sweepstakes betting. In 2025, California became the latest state to ban the model, while Google withdrew advertising certification for sweepstakes-based gaming apps. Regulators in several states have also argued that “free-to-play” sweepstakes are effectively a form of unlicensed gambling.

Despite ongoing legal debates, prediction markets have attracted growing interest as a potential alternative framework for real-money event trading. If approved, ProphetX would join Kalshi and Polymarket, two other CFTC-regulated exchanges, in offering a nationwide model that avoids traditional state gaming hurdles.

Unlike many competitors that started with politics or entertainment, ProphetX says its six-year experience in sports trading gives it an edge in adapting to the CFTC environment.

“While many of the new entrants are adapting their platforms to sports, we’re doing the opposite — taking our sports platform and adapting it to the CFTC framework,” Benzaquen said.

The company plans to continue operating as a sweepstakes platform until at least 2026, pending regulatory approval.

Founded as a state-regulated sports exchange, ProphetX has adjusted multiple times in response to shifting compliance landscapes. Benzaquen described the CFTC path as a more sustainable direction after years of pivoting between regulatory models.

“It’s been challenging but also a great learning experience,” he said. “There have been positives and negatives along the way, but overall, we think we’ve finally found our home with the CFTC moving forward.”

If successful, ProphetX’s transition could signal a broader industry migration toward prediction markets as sweepstakes operators search for legal certainty and operational stability.