CFTC Drops Proposed Ban on Political and Sports Prediction Markets as It Moves Toward Joint Crypto Framework With SEC

The U.S. Commodity Futures Trading Commission (CFTC) has withdrawn a controversial proposal that would have banned political and sports-related prediction markets, marking an early policy shift under its new leadership. At the same time, the agency is moving forward with a coordinated crypto rulemaking effort alongside the Securities and Exchange Commission (SEC), aimed at keeping digital asset trading activity within U.S. regulatory boundaries.

In his first public speech as CFTC Chair, Michael Selig said he had instructed agency staff to formally withdraw the 2024 event contracts rule proposal. The proposal would have prohibited political and sports-related event contracts, as well as a 2025 staff advisory that warned registrants about offering access to sports-related contracts amid ongoing litigation.

"I have directed CFTC staff to withdraw the 2024 event contracts rule proposal that would prohibit political and sports-related event contracts and the 2025 staff advisory, which cautioned registrants about offering access to sports-related event contracts due to ongoing litigation," Selig said.

According to Selig, the advisory was originally intended to highlight legal risks but instead "contributed to uncertainty" in the market. He said the guidance had created confusion for exchanges and intermediaries and therefore needed to be rolled back.

Selig described the decision as the first step in a broader reset of the CFTC's approach to prediction markets, which he referred to as "event contracts." He noted that such contracts have operated under the CFTC's jurisdiction for more than 20 years, framing the reversal as a return to regulatory clarity rather than a departure from established oversight.

The chair has now directed staff to begin drafting a new event-contracts rulemaking designed to establish clearer standards and provide legal certainty for platforms offering these products. He also instructed staff to reassess the CFTC's role in pending federal court cases involving jurisdictional questions.

In parallel, the agency will work with the SEC on a joint interpretation of Title VII definitions to better distinguish between commodity options, security options, swaps and security-based swaps. The effort is intended to reduce overlap and ambiguity between the two regulators.

Selig used the speech to unveil "Project Crypto," a formal partnership with SEC Chair Paul Atkins that aims to create a shared federal framework for digital asset markets. The initiative will focus on developing a common crypto asset taxonomy, clarifying jurisdictional boundaries between agencies and removing duplicative compliance requirements that have driven some activity offshore.

Backing Atkins's view that "most crypto assets trading today are not securities," Selig said he has asked staff at both agencies to consider joint codification of Atkins's taxonomy as an interim step while Congress continues to work on broader market-structure legislation.

Beyond prediction markets, Selig outlined a series of additional initiatives, including expanding eligible tokenized collateral, bringing "true" perpetual futures onshore and clarifying when leveraged retail crypto contracts can rely on the "actual delivery" exception when traded off-exchange.

He also floated the idea of creating a new designated contract market category for retail leveraged crypto trading and said the CFTC would explore safe harbors and potential innovation exemptions for software developers, non-custodial wallet providers, DeFi protocols and other on-chain infrastructure participants.