The U.S. CFTC withdraws the draft ban on political event contracts, predicting a shift in market regulatory stance

The chairman of the Commodity Futures Trading Commission (CFTC), Mike Selig, announced on Wednesday the formal withdrawal of the "event contract" regulatory proposal put forward in 2024, and the repeal of a related guidance issued during the Biden administration.

The proposal originally aimed to prohibit prediction contracts based on the outcomes of political events, equating them with contracts related to war, terrorism, and other "contrary to public interest" matters. Selig stated that the 2024 proposal was a manifestation of the previous administration's "overreach in value-judgment regulation." The CFTC will reintroduce a set of new rules based on the Commodity Exchange Act (CEA) that are more consistent and rational, to support responsible innovation in the derivatives market and align with the legislative intent of Congress. This policy adjustment sends a clearer regulatory signal for prediction markets.

Previously, the CFTC lost a lawsuit against Kalshi, which forced it to allow political prediction contracts to launch. With the new administration in place, institutions including Coinbase and Cboe have also begun actively engaging in prediction market-related businesses. The withdrawal of the old regulations is seen as a significant turning point in the direction of U.S. prediction market regulation.