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David Pokima
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The agency called the 2024 rule a “frolic into merit regulation” and said it will pursue new rulemaking grounded in the Commodity Exchange Act to provide clarity for prediction market operators.
Commodity Futures Trading Commission Chairman Michael S. Selig has formally withdrawn a 2024 notice of proposed rulemaking that would have banned political, sports and war-related event contracts, marking the clearest signal yet that the agency intends to regulate prediction markets rather than restrict them.
Key Takeaways:
– The CFTC scrapped both its 2024 proposal to ban event contracts and a 2025 staff advisory that had warned firms away from sports-related markets.
– Chairman Selig dismissed the earlier ban as a politically driven “frolic into merit regulation” and committed to building a new rules-based framework.
– The move lands as Kalshi, Polymarket and Coinbase fight a wave of state lawsuits alleging their sports contracts amount to unlicensed gambling.
The agency also rescinded CFTC Staff Letter 25-36, a September 2025 advisory that had warned regulated entities to exercise caution when facilitating sports-related event contracts due to ongoing litigation. In the remarks following the decision, Selig said:
“The 2024 event contracts proposal reflected the prior administration’s frolic into merit regulation with an outright prohibition on political contracts ahead of the 2024 presidential election.”
The CFTC does not intend to issue final rules under the withdrawn proposal, according to the press release.
Instead, the commission will advance a new rulemaking framework anchored in the Commodity Exchange Act, aiming to establish clear standards for event contracts and provide legal certainty for exchanges and intermediaries.
Selig Frames Withdrawal as First Step Toward Comprehensive Event Contracts Rulemaking
The announcement follows remarks Selig delivered on January 29 at a joint CFTC-SEC harmonization event alongside Securities and Exchange Commission Chairman Paul Atkins. As reported, Selig used his first public speech as chairman to outline a broader reset of the agency’s approach to prediction markets.
“For too long, the CFTC’s existing framework has proven difficult to apply and has failed our market participants,” Selig said. “That is something I intend to fix by establishing clear standards for event contracts that provide certainty to market participants.”
Selig also directed staff to reassess the commission’s participation in pending federal court cases where jurisdictional questions are at issue, signaling that the CFTC may intervene to defend its exclusive authority over commodity derivatives.
Prediction Market Platforms Navigate Booming Growth and State-Level Legal Battles
The withdrawal arrives as prediction markets experience rapid expansion and intensifying regulatory friction. Combined trading volumes on Polymarket and Kalshi, the two largest platforms, reached $37 billion in 2025, drawing in major exchanges eager to compete.
Coinbase launched prediction markets through a partnership with Kalshi, a federally regulated designated contract market, in late January. Crypto.com recently spun out its prediction business into a standalone platform called OG. Polymarket returned to the U.S. market in December after receiving CFTC no-action relief, and Gemini secured a designated contract market license for its Titan platform.
Meanwhile, state gaming regulators have pushed back. Nevada filed a civil enforcement action against Coinbase this week, arguing that event contracts tied to sports constitute unlicensed gambling. Coinbase has sued regulators in Michigan, Illinois and Connecticut over similar claims.
The NCAA has also urged the CFTC to halt college sports prediction trading, warning that the sector exposes student-athletes to integrity risks and operates outside state-level safeguards.
Selig, who was sworn in on December 22, has not provided a firm timeline for the new rulemaking, but positioned event contracts as a priority alongside the agency’s broader “Project Crypto” initiative with the SEC.
