SKN | U.S. Regulator Scraps Biden-Era Prediction Market Ban, Signals Reset Under Trump

CFTC Formally Reverses Course on Prediction Markets

The U.S. Commodity Futures Trading Commission has officially abandoned its attempt to restrict prediction markets, withdrawing a controversial Biden-era proposal that would have banned political event contracts and reopening the door to a more permissive regulatory framework.

CFTC Chairman Mike Selig, appointed under President Donald Trump, moved this week to pull a 2024 rule proposal and rescind a related advisory, effectively ending the agency’s prolonged legal and policy battle with prediction market platforms such as Kalshi and Polymarket.

The decision marks a sharp break from the prior administration’s approach and resets the regulatory outlook for event-based derivatives tied to elections and other political outcomes.

End of the ‘Public Interest’ Ban

In 2024, the CFTC proposed a rule that would have prohibited contracts linked to political events, grouping them with markets tied to war, terrorism and assassination and labeling them “contrary to the public interest.” The proposal drew fierce opposition from prediction market operators and legal scholars, who argued the agency was engaging in merit-based regulation beyond its statutory authority.

That rule never reached final adoption. The CFTC also suffered a court loss in its effort to block Kalshi’s political contracts, a ruling that weakened the agency’s legal footing just months before the presidential election.

With new leadership in place, Selig has now formally cleared that proposal from the regulatory agenda.

“The 2024 event contracts proposal reflected the prior administration’s frolic into merit regulation with an outright prohibition on political contracts ahead of the 2024 presidential election,” Selig said in a statement. “The Commission is withdrawing that proposal and will advance a new rulemaking grounded in a rational and coherent interpretation of the Commodity Exchange Act.”

A More Tech-Friendly Rulemaking Ahead

Rather than leaving prediction markets in regulatory limbo, Selig said the agency will move forward with a new event contracts rulemaking that is expected to be more accommodating to innovation while remaining consistent with congressional intent.

He previously signaled this shift in remarks last week, saying he had directed CFTC staff to begin drafting a new framework for event-based contracts. The goal, according to the chairman, is to promote “responsible innovation” rather than impose blanket prohibitions.

The move also included the withdrawal of a September advisory that had warned platforms about potential litigation risks. Selig said the guidance, though intended as a caution, had instead created confusion and uncertainty for market participants.

Trump Administration Embrace Fuels Industry Interest

The regulatory reset has already begun to reshape industry expectations. Under the Trump administration, prediction markets have gained new legitimacy, attracting interest from major players exploring entry into the space.

Coinbase has publicly discussed the possibility of offering prediction-style products, while exchange operator Cboe has examined adjacent market structures that could benefit from clearer rules. The reversal signals that Washington is no longer treating political prediction markets as inherently suspect.

Broader Implications for Crypto Oversight

The policy shift comes as the CFTC positions itself for a larger role in digital asset regulation. Congress is still negotiating a comprehensive crypto market structure bill that would assign the CFTC oversight of crypto spot markets that do not involve securities, further expanding the agency’s influence.

Prediction markets sit at the intersection of derivatives, crypto and real-world data, making them a test case for how the U.S. balances innovation with regulatory safeguards. With the Biden-era restrictions now formally discarded, the sector enters a new phase — one shaped less by prohibition and more by rulemaking.

For prediction market firms, the message from Washington is clear: the do-over has begun.