Commodity Futures Trading Commission Chair Michael S. Selig said Thursday that the regulator will draft “clear rules” for prediction markets and withdraw a proposal that prohibits sports and politics-related contracts.
CFTC Announces Major Policy Shift
Selig said the commission is withdrawing previous proposals and advisories that have led to market uncertainty.
“It is time for clear rules and a clear understanding that the CFTC supports lawful innovation in these [prediction] markets,” Selig declared in a public statement.
Selig told the agency staff to drop the 2024 rule proposal that prohibited political and sports event contracts. He also directed them to scrap the 2025 advisory that urged prediction markets to exercise caution over offering sports contracts due to legal concerns.
Selig Wants Clarity For Prediction Market Participants
In addition, the CFTC is drafting “clear standards” for event contracts.
“For too long, the CFTC's existing framework has proven difficult to apply and has failed our market participants,” Selig remarked.
Selig said he’s also asked the staff to reevaluate its involvement in matters currently under consideration by the federal district and circuit courts.
“Where jurisdictional questions are at issue, the Commission has the expertise and responsibility to defend its exclusive jurisdiction over commodity derivatives,” CFTC’s top executive said.
State Gaming Regulators Vs. Prediction Markets
The fresh set of guidelines comes at a time when prediction markets are facing increased legal scrutiny from state authorities.
Coinbase filed lawsuits against Michigan, Illinois, and Connecticut in December, seeking to establish that the CFTC is the sole regulator of these markets, not individual state gaming regulators.
The cryptocurrency behemoth, which is planning to enter the prediction markets sector via a partnership with Kalshi, a CFTC-regulated platform, argued that state intervention could cause "immediate and irreparable" harm to its operations.
Moreover, former New Jersey Gov. Chris Christie, who currently serves as a strategic advisor to the American Gaming Association, warned about the rapid expansion of sports-related prediction markets. He stated that these platforms pose serious legal, economic, and ethical risks, undermining state law and threatening the integrity of professional and amateur sports.
Stocks Impacted
Genius Sports, which provides services for sports leagues and betting partners, failed to rally on the news. Shares of companies involved in sports betting, including DraftKings and Flutter Entertainment, showed mixed signals.
Coinbase and Robinhood, which is also seeking to offer betting contracts, closed lower during the regular trading session.
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