CFTC Drops Biden-Era Plan to Ban Political Prediction Markets as States Step Up Scrutiny

The U.S. Commodity Futures Trading Commission has pulled back from a controversial proposal that would have banned political prediction market contracts, marking a clear shift from a late Biden-era regulatory push that drew sharp criticism from industry players.

In a statement released Wednesday, the CFTC confirmed it will not move forward with the proposed “Event Contracts” rule, first introduced in May 2024. The agency also withdrew a 2025 staff advisory that had warned exchanges about offering sports-related event contracts.

CFTC Chairman Michael S. Selig announced the decisions, signaling a reset in how the agency plans to approach prediction markets. He criticized the earlier proposal as an overreach that strayed from the commission’s core mandate.

“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. He added that the commission now intends to pursue a new rulemaking based on a “rational and coherent interpretation” of the Commodity Exchange Act.

A debated market finds new footing

The abandoned proposal would have barred contracts tied to elections and other politically sensitive events. Supporters of the rule argued that such products resembled gambling and posed risks to public trust. Critics countered that prediction markets serve as legitimate tools for hedging risk and aggregating information, and warned that a ban would stifle innovation in federally regulated derivatives markets.

By stepping away from an outright prohibition, the CFTC has reopened the door for these products, at least at the federal level. But that shift comes as pressure mounts elsewhere.

States push back as jurisdictional lines blur

While the CFTC is recalibrating its stance, state regulators are taking a more aggressive approach. This week, Nevada’s gaming regulator filed a complaint against Coinbase, alleging the exchange offered unlicensed sports betting through event-based contracts. Coinbase has argued that the action conflicts with federal law governing derivatives markets.

The dispute highlights a growing jurisdictional clash. Coinbase and other platforms maintain that Congress granted the CFTC exclusive authority over listed event contracts, even as states seek to apply local gaming laws to products they view as betting.

Early Thursday, Coinbase Chief Legal Officer Paul Grewal said a Nevada court declined to halt the company’s offerings without a hearing. A related federal challenge is now underway. In a separate statement, Ryan VanGrack, Coinbase’s vice president of litigation, described the state lawsuits as a “power grab.”

Courts and competitors shape the landscape

The CFTC’s retreat also follows recent court losses. Last year, prediction market platform Kalshi won a ruling allowing it to list election-related contracts after the agency attempted to block them. Offshore-based Polymarket has since drawn renewed attention as U.S. interest in prediction markets grows, while decentralized finance platforms such as Hyperliquid have also entered the space.

Together, these developments suggest the future of event contracts will be shaped as much by courts and state regulators as by federal rulemaking.

What comes next

By scrapping the proposed ban and promising a fresh regulatory framework, the CFTC has eased immediate federal pressure on political prediction markets. However, ongoing state-level challenges and unresolved legal questions mean the industry’s path forward remains uncertain.

For now, the debate over whether prediction markets are closer to gambling or financial instruments is far from settled. What is clear is that regulators, courts, and market participants are all vying to define the rules of a fast-evolving corner of the financial system.