CFTC Withdraws 2024 Proposal to Ban Sports and Political Prediction Markets

Highlights:

• The CFTC dropped a 2024 proposal and closed the door on a ban tied to event contracts.
• The shift gives prediction markets more clarity as the agency prepares a fresh rule path.
• Regulators also pulled staff guidance that had added legal uncertainty for firms.

The Commodity Futures Trading Commission has withdrawn a 2024 Biden-era proposal tied to event contracts. Mike Selig, the recently appointed chair, confirmed the decision on Wednesday. He said the agency will not finalize rules based on that notice. Selig explained that the proposal relied on merit-based regulation rather than clear statutory authority. The withdrawal of the prediction markets proposal formally ends a rulemaking effort that remained unresolved since last year.

🚨BREAKING : The #CFTC just pulled back its proposed rule that would’ve banned sports & political prediction #markets a major reversal from the previous administration’s stance.#CryptoMarket #CryptoTrading pic.twitter.com/RDb8PdcmeA

— SmartViewAI.Com (@smartviewai) February 5, 2026

The prediction markets proposal sought to restrict sports, political, and other event contracts. Regulators previously argued these products conflicted with the public interest. However, Selig said the approach exceeded the agency’s role. He linked the proposal to policy decisions made ahead of the 2024 election.

Selig said:

“The Commission is withdrawing that proposal and will advance a new rulemaking grounded in a rational and coherent interpretation of the Commodity Exchange Act that promotes responsible innovation in our derivatives markets in line with Congressional intent.”

The commission affirmed that it would resume the process according to the current legislation. This redesign provides predictable federal expectations to regulated firms. The market participants are no longer experiencing uncertainty associated with the abandoned proposal.

Fresh Rule Path Opens Space for Prediction Markets

The commission plans to advance a new approach that replaces earlier efforts that wanted to treat event contracts as gaming products. Selig said the agency will focus on a rational interpretation of its legal mandate. The withdrawal of the proposal comes after years of internal debate about event contracts. The previous leadership sought to restrict certain contracts outright. However, Selig said the agency will not revive that framework. Instead, the CFTC will use formal procedures to develop rules for prediction markets. This process will give the market participants a clearer legal reference point.

The Biden era prediction markets rulemaking was a frolic into merit regulation with an outright ban on political contracts ahead of the 2024 presidential election. The @CFTC is withdrawing that endeavor and will advance a new rule grounded in a rational interpretation of the law. https://t.co/sVrVQJVe8y

— Mike Selig (@ChairmanSelig) February 4, 2026

The recent regulatory actions reflect this direction. Gemini received approval for a Designated Contract Market license after submitting its application in 2020. The approval followed several years of review by federal regulators. The approval allows Gemini to expand regulated derivatives offerings.

At the same time, platforms such as Polymarket and Kalshi are attracting users through sports-related contracts. Their growth has continued despite the earlier regulatory uncertainty. Meanwhile, Coinbase rolled out its prediction market product to American users in all 50 states last month.

Staff Advisory Rollback Aims to Reduce Legal Uncertainty

Alongside the withdrawal of the prediction markets proposal, the commission also removed a September staff advisory on sports event contracts. The letter warned firms about litigation exposure and state enforcement actions. It urged companies to prepare contingency plans and enhanced disclosures. However, Selig said the advisory created confusion among regulated entities. Firms struggled to determine how much weight the guidance carried.

The agency acknowledged that the advisory lacked formal authority. Selig said that future guidance for prediction markets should come through formal rulemaking instead of staff letters. The withdrawal removes an informal compliance signal that influenced internal risk decisions.

To support this shift, the CFTC, under the leadership of Caroline Pham, formed a CEO Innovation Council. Acting Chair Caroline Pham noted that the agency needs industry input as digital asset oversight expands. The council provides a structured channel for engagement during the upcoming rulemaking.