CFTC Abandons Biden-Era Ban on Prediction Markets, Paving the Way for Explosive Growth in Political and Sports Betting

In a dramatic reversal that has sent shockwaves through the fintech and crypto worlds, the Commodity Futures Trading Commission (CFTC) under Chairman Michael S. Selig has formally withdrawn a controversial 2024 proposal that would have banned political, sports, and war-related event contracts. This bold move signals a fundamental shift in how the United States will regulate prediction markets, potentially unlocking a multi-billion dollar industry that has been operating in legal limbo.

The “Frolic into Merit Regulation” That Never Was

The CFTC’s decision to scrap the 2024 notice of proposed rulemaking represents more than just bureaucratic housekeeping—it’s a complete repudiation of what Chairman Selig called the previous administration’s “frolic into merit regulation.” In plain terms, Selig is accusing his predecessors of overstepping their authority by attempting to ban certain types of contracts based on their content rather than their structure.

“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 stated in the agency’s press release. This wasn’t just regulatory overreach—it was naked political interference in market operations.

The withdrawal also eliminates CFTC Staff Letter 25-36, a September 2025 advisory that had warned regulated entities to exercise caution when facilitating sports-related event contracts due to ongoing litigation. By rescinding both documents simultaneously, the CFTC is sending a clear message: prediction markets are here to stay, and the agency intends to provide clarity rather than confusion.

A New Era of Regulatory Clarity

Rather than implementing the restrictive rules proposed under the Biden administration, the CFTC will now pursue new rulemaking grounded in the Commodity Exchange Act. This approach aims to provide legal certainty for prediction market operators while maintaining appropriate oversight of these novel financial instruments.

“For too long, the CFTC’s existing framework has proven difficult to apply and has failed our market participants,” Selig explained during a joint CFTC-SEC harmonization event on January 29. “That is something I intend to fix by establishing clear standards for event contracts that provide certainty to market participants.”

This regulatory reset couldn’t come at a more critical time. Prediction markets have exploded in popularity, with combined trading volumes on Polymarket and Kalshi reaching an astounding $37 billion in 2025 alone. Major players like Coinbase, Crypto.com, and Gemini are all racing to capture market share, creating a gold rush atmosphere in the sector.

The Big Players Are Already Moving

The timing of the CFTC’s announcement is particularly significant given the aggressive expansion strategies of major platforms. Coinbase launched prediction markets through a partnership with Kalshi in late January, while Crypto.com recently spun out its prediction business into a standalone platform called OG. Polymarket, after receiving CFTC no-action relief, has returned to the U.S. market with renewed vigor.

Perhaps most notably, Gemini—the crypto exchange founded by the Winklevoss twins—secured a designated contract market license for its Titan platform, clearing a key regulatory hurdle that will allow it to operate prediction markets for U.S. customers.

“Gemini Clears Key CFTC Approval to Launch Prediction Market Platform in US,” announced a recent headline, highlighting the billionaire twins’ latest move to dominate the prediction market space.

State Regulators Push Back Hard

Despite the CFTC’s apparent embrace of prediction markets, the sector faces intense opposition at the state level. Nevada has filed a civil enforcement action against Coinbase, arguing that event contracts tied to sports constitute unlicensed gambling. Coinbase has responded by suing regulators in Michigan, Illinois, and Connecticut over similar claims, setting up a legal showdown that could determine the future of the industry.

The NCAA has also weighed in, urging the CFTC to halt college sports prediction trading. The organization warns that the sector exposes student-athletes to integrity risks and operates outside state-level safeguards designed to protect amateur sports.

This patchwork of state regulations creates a challenging environment for national platforms. While the CFTC may provide federal clarity, companies must still navigate a complex web of state laws that vary dramatically in their approach to prediction markets.

What This Means for the Future of Prediction Markets

The CFTC’s withdrawal of the Biden-era proposal represents a watershed moment for prediction markets. By abandoning content-based restrictions and committing to a rules-based framework grounded in the Commodity Exchange Act, the agency is effectively endorsing these markets as legitimate financial instruments rather than gambling products.

This regulatory clarity could trigger explosive growth in the sector. With major exchanges like Coinbase, Gemini, and Crypto.com now able to operate with greater certainty, prediction markets could evolve from niche crypto experiments into mainstream financial tools used by millions of Americans.

The implications extend far beyond simple betting. Prediction markets have proven remarkably accurate at forecasting election outcomes, economic trends, and geopolitical events. By providing a regulated venue for these markets to flourish, the CFTC may be unleashing a powerful new tool for aggregating and pricing information about the future.

The Road Ahead

While Chairman Selig has not provided a firm timeline for the new rulemaking, he has positioned event contracts as a priority alongside the agency’s broader “Project Crypto” initiative with the SEC. This suggests that comprehensive regulation of prediction markets could arrive within the next 12-18 months.

The CFTC’s shift also signals a broader change in how Washington views cryptocurrency and blockchain technology. After years of regulatory hostility, the current administration appears willing to embrace innovation in financial markets, provided it can be properly supervised.

For prediction market operators, this is welcome news indeed. After years of operating in legal gray areas or being forced to block U.S. customers entirely, these companies now have a path to legitimacy and growth. The race is on to build the dominant platforms of tomorrow, and the stakes couldn’t be higher.

The post CFTC Formally Withdraws Biden-Era Proposal to Ban Sports and Political Prediction Markets appeared first on Cryptonews.

tags: CFTC, prediction markets, Michael Selig, commodity futures, event contracts, Polymarket, Kalshi, Coinbase, Gemini, Crypto.com, regulatory clarity, sports betting, political betting, blockchain, cryptocurrency, OG platform, Project Crypto, SEC, gambling regulation, state lawsuits, NCAA, market forecasting, financial innovation

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