The US Commodity Futures Trading Commission has withdrawn a Biden administration-era proposal that would have banned sports and political prediction markets, some of the most popular event contracts today.
The recently confirmed CFTC chair, Mike Selig, said on Wednesday that the agency has withdrawn a 2024 notice of proposed rulemaking that sought to ban event contracts for sports, politics and war, among other topics, classifying them as “contrary to the public interest.”
Selig said the proposal “reflected the prior administration’s frolic into merit regulation with an outright prohibition on political contracts ahead of the 2024 presidential election,” adding that CFTC doesn’t plan to issue final rules on the proposal.
“The Commission is withdrawing that proposal and will advance a new rulemaking grounded in a rational and coherent interpretation of the Commodity Exchange Act that promotes responsible innovation in our derivatives markets in line with Congressional intent,” he added.
It’s the agency’s latest move affecting prediction markets such as Polymarket and Kalshi, which have surged in popularity for allowing bets on a wide range of events, most notably sports.
The platforms, including offerings from Coinbase and Crypto.com, have faced legal challenges from multiple states that argue they offer unlicensed gambling, a claim the platforms have pushed back on, arguing they’re regulated exclusively by the CFTC.
CFTC takes down staff letter on sports event contracts
Selig said the CFTC also withdrew a September staff letter that reminded CFTC-regulated entities of their obligations when facilitating sports event contracts and of the need to be prepared for litigation.
The letter, which came ahead of a US government shutdown, told regulated entities to “be prepared for all foreseeable conditions that may result from facilitating the trading and clearing of sports-related event contracts.”
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It added that CFTC staff were aware of various state regulatory actions and lawsuits around sports event contracts.
The letter warned that companies should be prepared to face such action with “appropriate contingency planning, disclosures, and risk management policies and procedures.”
Selig said the advisory “intended to highlight litigation considerations,” but it had “inadvertently created confusion and uncertainty for our market participants.”
“I look forward to working with staff on an event contracts rulemaking,” he added.
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