The U.S. Commodity Futures Trading Commission (CFTC) has delivered a major regulatory shift for the crypto industry, officially withdrawing a Biden-era proposal that sought to ban political, sports, and conflict-related event contracts. The move removes a cloud of uncertainty hanging over crypto-linked prediction markets and signals a friendlier, more innovation-focused stance under new leadership.
CFTC Reverses Course on Event Contracts
In a statement released this week, Mike Selig, the newly confirmed chair of the Commodity Futures Trading Commission, confirmed that the agency has canceled its 2024 notice proposing a sweeping ban on event contracts tied to politics, sports, and war. According to Selig, the proposal was now deemed “contrary to the public interest.”
The abandoned rule had been widely viewed as a preemptive attempt by the previous administration to curb political wagering ahead of the U.S. presidential election. However, Selig emphasized that the commission does not intend to finalize any rules stemming from that proposal. Instead, the CFTC plans to craft new, clearer regulations grounded in the Commodity Exchange Act, rather than outright prohibitions.
Crypto Prediction Markets Get Legal Clarity
Alongside scrapping the proposed ban, the CFTC also rescinded advisory guidance that had warned registered firms against offering certain event contracts due to unresolved legal risks. That guidance had effectively chilled innovation, leaving platforms unsure whether they were compliant or exposed.
With both measures rolled back, crypto prediction markets now gain much-needed legal certainty. Platforms offering real-time event contracts - particularly those focused on sports outcomes — have argued that their products fall squarely under federal derivatives oversight, not state-level gambling laws.
This clarity is especially relevant for fast-growing platforms like Polymarket and Kalshi, which have faced mounting legal challenges from multiple U.S. states alleging unlicensed betting activity. Those platforms have consistently denied wrongdoing, insisting that CFTC jurisdiction applies, not state gaming statutes.
A Shift Toward Responsible Innovation
Sources familiar with the regulator’s thinking say the decision reflects a broader strategy to foster responsible innovation within U.S. derivatives markets. Rather than blocking entire categories of financial products, the CFTC now appears focused on setting guardrails that balance consumer protection with market growth.
Selig has also clarified confusion surrounding a September advisory letter, which reminded firms of their obligations when dealing with sports-related contracts. While originally intended to address contingency planning amid legal disputes and a possible federal shutdown, the letter had instead spooked market participants and contributed to regulatory ambiguity. Selig acknowledged that outcome and said the agency aims to avoid similar missteps going forward.
Alignment With Broader Crypto Regulation Efforts
This regulatory pivot doesn’t stand alone. The CFTC recently confirmed it will collaborate with the Securities and Exchange Commission under the SEC’s Project Crypto, an initiative designed to harmonize U.S. digital asset oversight. The partnership is expected to reduce regulatory fragmentation and establish clearer jurisdictional boundaries between agencies.
Together, these moves suggest a notable shift in tone from U.S. regulators. Rather than viewing crypto-native financial products as threats to be contained, agencies are increasingly treating them as legitimate markets requiring modern, fit-for-purpose regulation.
For crypto platforms operating in the U.S., the message is clear: event markets are back on the table, and the era of blanket bans may be giving way to structured oversight.
