The hands-off approach taken by the federal regulator of prediction markets looks like it is about to get more hands-on, but perhaps in a good way for operators.
- CFTC chair Michael Selig said the agency will withdraw prior proposed bans and advisories and begin drafting clear new rules for prediction market event contracts.
- The shift marks a move away from a hands-off approach as prediction markets grow and face lawsuits over whether sports-related contracts are illegal gambling.
- Selig said the CFTC may step into ongoing litigation and coordinate with the SEC to clarify regulatory boundaries and reduce market uncertainty.
U.S. Commodity Futures Trading Commission (CFTC) chairman Michael Selig announced Thursday that the agency will officially withdraw unfinalized rules that were proposed in 2024 for event contracts. Those rules would have prohibited betting markets for politics and sports.
Also being pulled is a 2025 staff advisory letter that warned operators about offering sports event contracts amid ongoing lawsuits challenging their legality.
“While the advisory was issued at the staff level with the intent of bringing awareness to the litigation, it has instead contributed to uncertainty in our markets,” Selig said.
Selig added he had directed staffers to begin drafting specific rules for event contracts, which prediction markets offer to their users for trading. The users buy and sell these contracts, betting “yes” or “no” on a variety of outcomes tied to sports, politics, and economics.
CFTC Chair Michael Selig says the prediction market regulator will be drafting new rules for the exchanges. The CFTC might also insert itself into more prediction market-related litigation? pic.twitter.com/WLANlyEY0R
— Geoff Zochodne (@GeoffZochodne) January 29, 2026
“For too long, the CFTC’s existing framework has proven difficult to apply and has failed our market participants,” Selig said. “That is something I intend to fix by establishing clear standards for event contracts that provide certainty to market participants.”
The shift in approach at the CFTC comes as the prediction markets it regulates continue to grow and challenge the status quo for online sports betting in the U.S. There are now a dozen brands offering bettors the opportunity to wager on the Super Bowl, or the price of bitcoin, or the midterm elections, and in all 50 states.
For the CFTC’s part, it has been content to let prediction market operators “self-certify” a wide variety of event contracts during the Trump administration. The regulator’s hands-off approach has helped the growth of the exchanges. Selig's remarks Thursday suggested that approach will change somewhat, but maybe not to the detriment of prediction market operators.
"It is time for clear rules and a clear understanding that the CFTC supports lawful innovation in these markets," Selig said. "Consistent with my commitment to fostering responsible innovation in crypto asset markets, I will continue to support the responsible development of event contract markets and the important role they play in the broader financial system."
Help on the way?
There has, however, been pushback from states that see what prediction markets are doing as a little bit too much like state-regulated gambling. The legality of sports event contracts in particular is being challenged in court in several states, and that litigation looks set to continue for potentially years to come. Prediction market operators say they are federally regulated, while states say their rules should apply.
Selig seems concerned by this, as he said he told CFTC staff to “reassess” the regulator’s participation in ongoing litigation. His remarks suggest the CFTC could get involved in the raft of federal lawsuits involving prediction markets, much of which centers around whether their federal regulation trumps that of the states'.
“Where jurisdictional questions are at issue, the Commission has the expertise and responsibility to defend its exclusive jurisdiction over commodity derivatives,” Selig said.
Selig also said he directed CFTC staff to work with the Securities and Exchange Commission (SEC) on so-called “Title VII” definitions.
“This effort would draw clearer lines between certain commodity and security options, CFTC-regulated swaps, and SEC-regulated security-based swaps,” Selig said. “Clear, coordinated guidance will allow firms to scale products responsibly and reduce the number of innovations that fall into what (SEC chairman Paul) Atkins has aptly described as ‘the no man’s land’ between our two agencies.”
