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The US Commodity Futures Trading Commission (CFTC) has officially withdrawn a Biden administration–era proposal that sought to ban sports, political, and other event-based prediction markets. The decision marks a major regulatory shift for a fast-growing sector that includes platforms such as Polymarket, Kalshi, Coinbase, and Crypto.com.
The move was confirmed on Wednesday by newly appointed CFTC Chair Mike Selig, who criticized the withdrawn proposal as an overreach that conflicted with the agency’s statutory mandate and market innovation goals.
Proposal Targeted Event Contracts
The withdrawn proposal originated from a 2024 notice of proposed rulemaking that aimed to prohibit event contracts tied to sports, politics, and geopolitical events such as war. Regulators at the time argued that such contracts were “contrary to the public interest,” raising concerns about integrity, ethics, and public policy risks.
Event contracts allow traders to speculate on the outcomes of real-world events, ranging from election results to sports games. These markets have exploded in popularity in recent years, particularly during major political cycles and global sporting events.
Had the proposal been finalized, it would have effectively shut down a significant portion of the US prediction market industry.
Selig Slams Prior Approach
CFTC Chair Mike Selig did not mince words when addressing the withdrawn proposal, describing it as a “frolic into merit regulation” by the previous administration.
According to Selig, the proposal reflected an attempt to impose an outright ban on political prediction contracts ahead of the 2024 US presidential election, rather than relying on the CFTC’s established principles-based regulatory framework.
He emphasized that the agency does not intend to issue final rules based on the withdrawn notice and will instead pursue a fresh rulemaking process grounded in statutory interpretation.
“The Commission is withdrawing that proposal and will advance a new rulemaking grounded in a rational and coherent interpretation of the Commodity Exchange Act,” Selig said, adding that the goal is to promote responsible innovation while aligning with Congressional intent.
Relief For Prediction Markets
The decision is a significant win for prediction market platforms that have seen rapid growth in user activity and trading volumes. Platforms such as Polymarket and Kalshi have become especially popular for offering markets on elections, economic data releases, and sports outcomes.
Crypto-linked firms, including Coinbase and Crypto.com, have also expanded their event contract offerings, betting on growing demand for regulated, transparent prediction markets.
Industry participants have long argued that event contracts serve as valuable tools for price discovery, risk management, and market forecasting, rather than mere speculative gambling products.
Ongoing State-Level Challenges
Despite the CFTC’s withdrawal of the ban proposal, prediction markets continue to face legal challenges at the state level. Several US states have accused these platforms of offering unlicensed gambling services, particularly when it comes to sports-related contracts.
The platforms have pushed back strongly against those claims, maintaining that they are derivatives markets regulated exclusively by the CFTC under federal law. This jurisdictional dispute between state gambling authorities and federal regulators remains unresolved and could shape the industry’s future.
Staff Letter Also Withdrawn
In a related move, Selig confirmed that the CFTC has also withdrawn a September staff letter that addressed sports event contracts. The advisory reminded CFTC-regulated entities of their obligations when facilitating such contracts and urged them to prepare for potential litigation.
Issued ahead of a possible US government shutdown, the letter warned firms to implement contingency planning, disclosures, and risk management policies in light of ongoing lawsuits and regulatory actions by states.
However, Selig acknowledged that the advisory, while intended to highlight litigation risks, “inadvertently created confusion and uncertainty” among market participants.
By withdrawing both the proposal and the staff letter, the CFTC appears to be signaling a more measured and predictable regulatory stance.
What Comes Next
Selig said he looks forward to working with CFTC staff on a new event contracts rulemaking that balances innovation with market integrity. While no timeline has been provided, the shift suggests the agency is moving away from blanket prohibitions toward clearer, principle-based oversight.
For prediction market operators, the development reduces immediate regulatory risk at the federal level, though legal battles with states and future rulemaking outcomes will remain key factors to watch.
As interest in prediction markets continues to grow, the CFTC’s next steps could play a decisive role in shaping how these platforms operate in the US financial system.