2026-1-31 10:59 |
The Commodity Futures Trading Commission will draft clear standards for prediction markets and withdraw proposals that would prohibit political and sports-related event contracts, Chair Michael S. Selig said Thursday.
The move aims to end uncertainty and signal support for “lawful innovation” in event-based trading.
“Despite their history, many view them [prediction markets], as novel or unsettled, and that uncertainty has not served our markets, nor has it served the public interest,” Selig said.
CFTC pulls back prior guidance on sports and politicsSelig directed staff to pull a 2024 proposal targeting political and sports contracts and a 2025 advisory cautioning on sports markets.
He also said the agency will reassess its role in ongoing court cases and move toward a formal rulebook for event contracts.
In his first public remarks as chairman, Selig said the CFTC is withdrawing earlier proposals and advisories that have contributed to market confusion.
“It is time for clear rules and a clear understanding that the CFTC supports lawful innovation in these markets,” Selig said.
He added that the current framework “has proven difficult to apply” and has “failed” market participants, and directed staff to begin drafting an event contracts rulemaking.
Why it mattersThe shift comes as prediction platforms including Kalshi and Polymarket face lawsuits in multiple states over whether event contracts tied to sports constitute illegal gambling.
In December, Coinbase filed lawsuits against Michigan, Illinois, and Connecticut, arguing the CFTC is the sole regulator of prediction markets, not state gaming authorities, and warning that state intervention could cause “immediate and irreparable” harm.
Coinbase plans to enter the space through a partnership with Kalshi, a CFTC-regulated platform.
State regulators and attorneys general argue that sports betting falls under state jurisdiction, while tribal nations have also challenged the spread of such contracts based on sovereign rights over gambling on their lands.
Kalshi maintains that its products are not gambling, but federally regulated derivatives, and therefore not subject to state-level gaming laws.
Oversight and jurisdictionSelig said the agency will reevaluate its participation in pending federal court matters and defend its exclusive jurisdiction over commodity derivatives where needed.
He also said the CFTC is partnering with the Securities and Exchange Commission on “Project Crypto” to clarify jurisdictional lines and develop a clearer taxonomy for digital assets.
That includes pursuing a joint interpretation tied to Title VII definitions to draw clearer boundaries between commodity and security options, CFTC-regulated swaps, and SEC-regulated security-based swaps.
Not everyone is cheering the expansion of event-based trading.
Former New Jersey Gov. Chris Christie, now a strategic advisor to the American Gaming Association, warned that rapid growth in sports-related prediction markets poses legal, economic, and ethical risks, could undermine state law, and may threaten the integrity of professional and amateur sports.
Platforms welcome clarity as volumes growIndustry participants welcomed the regulator’s change in tone.
A spokesperson for the Coalition for Prediction Markets said the decision marked “a key step to foster market clarity, responsible innovation, and trust in American markets.”
Prediction markets have expanded rapidly, particularly among crypto-native traders seeking continuous exposure to real-time events.
Polymarket has emerged as a major liquidity hub for political and current-event contracts, with some individual markets attracting tens to hundreds of millions of dollars in volume.
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