The U.S. Commodity Futures Trading Commission has withdrawn a Biden administration-era proposal that would have banned sports and political prediction markets, some of the most popular event contracts today.
Recently confirmed CFTC Chairman Mike Selig he said on Wednesday, the agency withdrew a notice of proposed rulemaking for 2024 that sought to prohibit contracts for events related to sports, politics and war, among others, classifying them as “contrary to the public interest.”
Selig said the proposal “reflects the previous administration’s dabbling in substantive regulation by enacting a blanket ban on political contracting before the 2024 presidential election,” adding that the CFTC does not plan to issue final rules on the proposal.
“The Commission is withdrawing this proposal and will support new regulations based on a rational and consistent interpretation of the Commodity Exchange Act that promotes responsible innovation in our derivatives markets as Congress intended,” he added.
This is the latest move by the agency to impact prediction markets such as Polymarket and Kalshi, which have gained popularity by allowing betting on a wide range of events, especially sports.
The platforms, including Coinbase and Crypto.com offerings, have faced legal challenges from multiple states that claim they offer unlicensed gambling, which the platforms refute by arguing they are solely regulated by the CFTC.
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Selig said the CFTC also withdrew a September letter to employees that reminded CFTC-regulated entities of their responsibilities in handling sporting event contracts and the need to prepare for litigation.
The letter, issued before the U.S. government shutdown, told regulated entities to “be prepared for all foreseeable conditions that may result from the facilitation of trade and settlement of sporting event contracts.”
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She added that CFTC staff were aware of various state regulatory actions and lawsuits related to sporting event contracts.
The letter warned that companies should be prepared to deal with such actions by using “appropriate contingency planning, disclosure and risk management policies and procedures.”
Selig said the advisory “was intended to highlight issues related to litigation” but “inadvertently created confusion and uncertainty among our market participants.”
“I look forward to working with the staff to set regulations for event contracts,” he added.
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