U.S. CFTC Overhauls Prediction-Market Policy, Withdraws Biden-Era Regulatory Proposal

The U.S. Commodity Futures Trading Commission (CFTC) has overhauled its regulatory stance on prediction markets, formally withdrawing the prior administration’s policy centered on banning political event contracts. With new leadership taking office, analysts say the odds have increased for a more favorable regulatory environment for crypto assets and event-based contract markets.

According to CoinDesk on the 5th (local time), CFTC Chair Mike Selig said the agency will withdraw the proposed rule to ban political event contracts that was introduced in 2024 and pursue a new rulemaking process. The proposal sought to prohibit contracts based on political outcomes, treating them as akin to illegal contracts involving war, terrorism or assassination, on the grounds that they run counter to the public interest.

In a statement, Selig said the 2024 event-contract proposal was “an excessive attempt by the administration at the time to impose a sweeping ban on political contracts ahead of the presidential election,” adding that the Commission would withdraw it and “develop new rules based on a reasonable interpretation” of the Commodity Exchange Act.

The CFTC had effectively allowed related prediction markets after losing a lawsuit in 2024 over Kalshi’s launch of political event contracts. However, confusion persisted across the industry as regulators subsequently moved forward with proposals aimed at restricting political event contracts.

Along with this move, the CFTC also withdrew the cautionary advisory on event contracts it issued in September last year. Selig said the advisory had created legal uncertainty and confusion for market participants.

As the policy stance toward prediction markets shifts following the launch of the Trump administration, players such as Coinbase and the Chicago Board Options Exchange (Cboe) are also considering launching related products, making moves into the market increasingly visible. Prediction markets have grown rapidly as a means of betting on political and economic events, often combined with crypto-asset-based platforms.

The CFTC is also expected to play a central role in the future framework for regulating digital assets. A market-structure bill for the crypto sector currently under discussion in the U.S. Congress includes provisions that would grant the CFTC supervisory authority over spot markets for crypto assets that are not securities.

Market participants expect this policy shift to ease regulatory uncertainty for prediction-market operators such as Kalshi and Polymarket, and to serve as a catalyst for expanding the crypto-based event-contract market.