CFTC Reverses Course, Drops Ban on Political Prediction Markets

The U.S. Commodity Futures Trading Commission has formally abandoned its proposed ban on political prediction markets. Chairman Mike Selig withdrew the 2024 rule that would have prohibited contracts based on election outcomes.

Mike Selig, the new chairman of the U.S. Commodity Futures Trading Commission (CFTC), announced the withdrawal of the 2024 draft rule for prediction market event contracts, which originally proposed banning political event contracts and was described as a "policy overreach" by…

— Wu Blockchain (@WuBlockchain) February 5, 2026

The reversal marks a significant shift in federal policy toward platforms like Kalshi and Polymarket. These prediction markets allow users to trade contracts on real-world events, including elections and policy developments.

Selig announced the withdrawal on Wednesday, also scrapping a September advisory he said confused the industry. The move follows his confirmation as CFTC chairman under the Trump administration.

The withdrawn proposal had sought to legally equate political contracts with illicit bets on war, terrorism, and assassination. Former Chairman Rostin Behnam had argued such contracts would “commoditize and degrade” democratic participation.

Prediction Market Regulation: A Year of Whiplash

In May 2024, the CFTC voted to propose banning event contracts tied to political outcomes. Three Democratic commissioners approved the measure, calling it contrary to the public interest.

Behnam warned at the time that approving such markets would make the CFTC an “election cop.” Agency officials also noted they lacked capacity to ensure market integrity in this field.

Commissioners Caroline Pham and Summer Mersinger opposed the proposal. Pham called it a “stunning overreach” and suggested the agency needed a Government Accountability Office review.

The CFTC lost a court battle against Kalshi that same year over the firm’s election market offerings. Following that defeat, the agency allowed prediction markets based on political events to launch.

Brian Quintenz, a former CFTC commissioner advising Kalshi, criticized the original ban attempt as “bad government.” He warned it would push users toward offshore, unregulated platforms.

New Rulemaking on the Horizon

Selig described the 2024 proposal as the prior administration’s “frolic into merit regulation.” He accused the previous leadership of targeting political contracts ahead of the presidential election.

The chairman has directed staff to draft new event contracts rules. He promised a framework grounded in “rational and coherent interpretation” of the Commodity Exchange Act.

Meanwhile, prediction markets face growing pressure at the state level. Nevada, Massachusetts, Connecticut, and Tennessee have all moved against these platforms in recent months.

BREAKING: Nevada state court issues temporary restraining order against Polymarket over offering of event contracts, says that the CEA does not vest exclusive jurisdiction in the CFTC. TRO will remain in effect for 14 days; hearing on the PI motion scheduled for 2/11. pic.twitter.com/p1tRk38EMD

— Daniel Wallach (@WALLACHLEGAL) January 30, 2026

A Nevada court issued a temporary restraining order against Polymarket in January 2026. Judge Jason Woodbury blocked the platform from offering sports and events contracts to state residents.

The judge ruled that federal law does not grant exclusive jurisdiction over Polymarket’s contracts. This finding undermines a key legal defense prediction platforms have used to operate nationwide.

The state-level crackdown threatens a significant business segment. Event-based contracts represent over 80% of trading volumes for some platforms.

Selig’s federal policy shift arrives as prediction markets navigate this fragmented regulatory landscape. The new CFTC rulemaking could provide clearer guidelines for the industry’s future.

Prediction platforms have gained popularity in crypto circles for their binary betting structure. Users purchase yes-or-no contracts that pay out if their predictions prove correct.

The regulatory environment remains uncertain despite the federal reversal. State actions continue to challenge the industry’s legal foundation across multiple jurisdictions.