The U.S. Commodity Futures Trading Commission (CFTC) has withdrawn a Biden-era proposal that would have prohibited sports and political prediction markets, some of the most widely traded event contracts today.
On Wednesday, newly confirmed CFTC Chair Mike Selig announced that the agency is pulling its 2024 notice of proposed rulemaking, which aimed to ban event contracts covering sports, politics, war, and other topics, citing them as “contrary to the public interest.”
Selig criticized the proposal as “reflecting the prior administration’s foray into merit-based regulation with an outright ban on political contracts ahead of the 2024 presidential election,” and confirmed that the CFTC does not intend to issue final rules on it.
He added, “The Commission is withdrawing that proposal and will pursue a new rulemaking grounded in a rational, coherent interpretation of the Commodity Exchange Act, promoting responsible innovation in our derivatives markets in line with Congressional intent.”
The move marks the CFTC’s latest action impacting prediction markets like Polymarket and Kalshi, which have grown in popularity by allowing users to bet on a wide array of events, especially sports.
These platforms, including products offered by Coinbase and Crypto.com, have faced legal challenges in multiple states, where authorities argue they constitute unlicensed gambling. The platforms have pushed back, maintaining that they operate under CFTC oversight.
CFTC Withdraws Staff Letter on Sports Event Contracts
Selig also announced the withdrawal of a September staff letter that had reminded CFTC-regulated entities of their responsibilities when facilitating sports event contracts and of the need to prepare for potential litigation.
Issued ahead of a U.S. government shutdown, the letter advised regulated entities to “be prepared for all foreseeable conditions that may result from facilitating the trading and clearing of sports-related event contracts.” It noted that CFTC staff were aware of various state-level regulatory actions and lawsuits concerning sports event contracts.
The advisory warned that companies should plan for such actions with “appropriate contingency planning, disclosures, and risk management policies and procedures.”
Selig said the letter, while intended to “highlight litigation considerations,” had “inadvertently created confusion and uncertainty for our market participants.” He added, “I look forward to working with staff on an event contracts rulemaking.”
