The Commodity Futures Trading Commission will move to establish a clearer regulatory regime for the multi-billion dollar prediction markets industry, CFTC Chairman Michael Selig said Thursday.
Speaking in prepared remarks, Selig said: "It is time for clear rules and a clear understanding that the CFTC supports lawful innovation in these markets." He added: "Consistent with my commitment to fostering responsible innovation in crypto asset markets, I will continue to support the responsible development of event contract markets."
Prediction market platforms, including Polymarket and Kalshi Inc., allow customers to take binary yes-or-no positions on future events. Traded contracts have covered a range of outcomes, from the possibility of a U.S. government shutdown to the outcome of the Academy Awards. These venues have recorded rising trading activity even as some state gaming regulators have objected to their operations.
Selig laid out several concrete actions for the agency. He has directed CFTC staff to draft new rules specifically for event contracts, noting that "for too long, the CFTC’s existing framework has proven difficult to apply and has failed our market participants." In addition, the chairman said the agency will withdraw a 2024 rule proposal that would have prohibited political and sports-related event contracts. The CFTC also intends to pull a 2025 staff advisory that had warned registrants about offering access to sports-related event contracts.
Beyond rulemaking and rescission of past guidance, Selig ordered a reassessment of the Commission’s participation in pending federal court cases. He also instructed staff to coordinate with the Securities and Exchange Commission to develop a joint interpretation of Title VII definitions, with the aim of clarifying where regulatory responsibilities lie between the two agencies.
The chairman framed these steps as an effort to provide greater legal certainty to market participants while supporting innovation in related crypto asset markets. Details about timing, specific rule text, or subsequent procedural steps were not provided in the remarks.
Summary
The CFTC will craft a new rule set for prediction markets, withdraw a 2024 proposal and a 2025 advisory, reassess its role in pending court cases, and seek a joint Title VII interpretation with the SEC to better define regulatory boundaries.
Key points
- The CFTC plans to draft new event contracts rules to clarify application of its regulatory framework.
- The agency will withdraw a 2024 rule proposal banning political and sports-related event contracts and a 2025 staff advisory about sports-related contracts.
- The CFTC will reassess participation in pending federal court cases and work with the SEC on a joint interpretation of Title VII definitions to delineate agency boundaries.
Risks and uncertainties
- Legal uncertainty remains while the agency reassesses pending federal court cases - this affects prediction market operators and participants.
- Coordination with the SEC on Title VII interpretations may not immediately resolve regulatory boundaries between agencies, leaving short-term ambiguity for market participants in both derivatives and securities contexts.
- Opposition from some state gaming regulators continues to present a regulatory and compliance risk for platforms offering event contracts.