ProphetX Seeks Federal Oversight, Migrating From Sweepstakes to Prediction Market

The move follows intense regulatory pressure and market instability faced by the sweepstakes sector, with the company aiming for nationwide operation and greater stability by seeking dual registration as a Designated Contract Market (DCM) and a Derivatives Clearing Organization (DCO). ProphetX co-founder Jake Benzaquen confirmed the company believes its technology is ready for CFTC oversight, a process anticipated to continue through 2026.

The End of the Sweepstakes Model

The platform’s decision to change its business model is a direct response to the deteriorating environment for sweepstakes operators. This model uses a dual-currency structure to navigate state-level gaming laws, but it has recently faced growing regulatory scrutiny.

Key markets, including New Jersey, have forced operators out, and a recent Google advertising ban effectively cut off a vital marketing channel.

The shift allows ProphetX to move away from navigating a patchwork of state gaming commissions. The move to CFTC oversight also provides a significant financial advantage, as federally regulated entities typically avoid paying corporate state gaming taxes.

ProphetX CEO Dean Sisun stated the firm’s mission has always been to build a transparent and compliant marketplace. “Filing for DCM and DCO status is the next logical step in legitimizing the future of user-driven sports trading,” Sisun said.

Federal Compliance and Integrated Trading

ProphetX has filed applications with the CFTC for both DCM and DCO status. These applications, if approved, would allow the company to establish the first fully integrated exchange and clearinghouse in the US built specifically for sports-based event contracts.

The dual registration is designed to create a vertically integrated market where users can trade, clear, and settle contracts under full federal oversight.

ProphetX co-founder Jake Benzaquen noted, “We’re looking to take our prediction market and have it regulated by the CFTC.” He added that the company is currently meeting with the agency staff. The approval process is expected to last throughout 2026, though a government shutdown affecting CFTC personnel has caused an immediate delay.

Technology and Competitive Edge

ProphetX plans to enter the prediction market space with a sports-only strategy, differentiating itself from rivals like Kalshi and Polymarket, which also offer markets on elections and pop culture.

Sisun emphasized the unique needs of sports-based trading, noting, “There are no ties in elections, there are no injuries in elections.” The company is leveraging its six years of experience in the sports domain.

A key part of ProphetX’s regulatory filing is its proprietary Request for Quote (RFQ) Parlay Mechanism. This innovation allows users to construct and price multi-event combinations directly with counterparties.

Benzaquen described the feature as allowing for dynamic price discovery and efficient multi-leg exposure, mirroring protocols found in traditional financial markets. Unlike some competitors, ProphetX will not create an affiliated trading arm to provide liquidity; instead, it will partner with institutional liquidity providers.

“We believe that our underlying model and technology and liquidity that we have in place are basically ready to be operated under CFTC oversight,” Benzaquen said, concluding that after years of operational changes, the company has “finally found our home with the CFTC moving forward.”