A significant shift is underway in the world of prediction markets. The Commodity Futures Trading Commission (CFTC) has unexpectedly reversed course, withdrawing a proposed rule that threatened to severely restrict, or even ban, certain types of event contracts.
The initial proposal, unveiled in 2024, aimed to classify event contracts centered around political contests as forms of gambling. This sparked immediate concern within the industry, raising questions about the future of these increasingly popular markets.
Now, the CFTC has signaled a dramatic change in direction. The commission officially announced the withdrawal of the proposed rulemaking, stating it has no plans to move forward with the original restrictions.
The previous administration’s approach was described as a misguided attempt at “merit regulation,” specifically targeting political contracts leading up to the 2024 presidential election. The new leadership views this as an overreach and a departure from the core principles of the Commodity Exchange Act.
Alongside the withdrawal of the proposed rule, a staff advisory issued in September 2025 has also been rescinded. This advisory had focused on potential market disruptions during government funding lapses, adding another layer of uncertainty for market participants.
CFTC Chairman Michael S. Selig emphasized the agency’s commitment to fostering innovation within the financial markets. He stated that the current actions demonstrate a dedication to “lawful innovation” and a return to a more reasoned interpretation of existing regulations.
Selig directly criticized the previous proposal as an unnecessary prohibition on political contracts, highlighting the importance of aligning regulatory efforts with Congressional intent. The goal now is to create a framework that encourages responsible innovation, rather than stifling it.
The Chairman also acknowledged that the recent staff advisory, while well-intentioned, inadvertently caused confusion and uncertainty. He expressed his commitment to working with staff to develop a new, clearer set of rules for event contracts.
This reversal is being welcomed by the prediction market industry, which has long advocated for clear and consistent regulations. The move signals a potential new era of stability and growth for these unique markets.
The industry anticipates that the forthcoming rulemaking will provide the clarity it desperately needs, paving the way for further development and responsible participation.
