CFTC Officially Reverses Biden Administration’s Plan to Prohibit Sports and Political Prediction Markets

The agency referred to the 2024 rule as a “frolic into merit regulation” and indicated it will initiate new rulemaking based on the Commodity Exchange Act to clarify regulations for prediction market operators.

Commodity Futures Trading Commission Chairman Michael S. Selig has officially retracted a 2024 notice of proposed rulemaking that aimed to prohibit contracts related to political, sports, and war events, signaling the agency’s intention to regulate prediction markets rather than impose restrictions.

Key Takeaways:

– The CFTC has abandoned both its 2024 proposal to prohibit event contracts and a 2025 staff advisory that cautioned firms against engaging in sports-related markets.

– Chairman Selig characterized the previous ban as a politically motivated “frolic into merit regulation” and pledged to develop a new rules-based framework.

– This decision comes as Kalshi, Polymarket, and Coinbase contend with a series of state lawsuits claiming their sports contracts equate to unlicensed gambling.

The agency also revoked CFTC Staff Letter 25-36, a September 2025 advisory that had advised regulated entities to be cautious when facilitating sports-related event contracts due to ongoing legal challenges. In comments following the decision, Selig stated:

“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The CFTC does not plan to implement final rules based on the withdrawn proposal, as indicated in the press release.

Instead, the commission will pursue a new rulemaking framework rooted in the Commodity Exchange Act, with the goal of establishing clear standards for event contracts and ensuring legal certainty for exchanges and intermediaries.

Selig Frames Withdrawal as First Step Toward Comprehensive Event Contracts Rulemaking

The announcement follows remarks made by Selig on January 29 at a joint CFTC-SEC harmonization event alongside Securities and Exchange Commission Chairman Paul Atkins. As reported, Selig utilized his inaugural public address as chairman to outline a comprehensive reset of the agency’s strategy regarding prediction markets.

“For too long, the CFTC’s existing framework has proven challenging to apply and has not adequately served our market participants,” Selig stated. “That is something I intend to rectify by establishing clear standards for event contracts that provide certainty to market participants.”

Selig also instructed staff to reevaluate the commission’s involvement in ongoing federal court cases where jurisdictional issues are at stake, indicating that the CFTC may step in to assert its exclusive authority over commodity derivatives.

Prediction Market Platforms Navigate Booming Growth and State-Level Legal Battles

The withdrawal comes as prediction markets are witnessing rapid growth and increasing regulatory challenges. Combined trading volumes on Polymarket and Kalshi, the two largest platforms, reached $37 billion in 2025, attracting major exchanges eager to enter the market.

Coinbase introduced prediction markets through a partnership with Kalshi, a federally regulated designated contract market, in late January. Crypto.com recently separated its prediction business into a standalone platform named OG. Polymarket re-entered the U.S. market in December after obtaining CFTC no-action relief, and Gemini secured a designated contract market license for its Titan platform.

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Meanwhile, state gaming regulators have responded with resistance. Nevada initiated a civil enforcement action against Coinbase this week, contending that event contracts associated with sports constitute unlicensed gambling. Coinbase has filed lawsuits against regulators in Michigan, Illinois, and Connecticut over similar allegations.

The NCAA has also urged the CFTC to suspend college sports prediction trading, cautioning that the sector poses integrity risks to student-athletes and operates outside state-level protections.

Selig, who was sworn in on December 22, has not provided a specific timeline for the new rulemaking but has identified event contracts as a priority alongside the agency’s broader “Project Crypto” initiative with the SEC.

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