- The US Commodity Futures Trading Commission has withdrawn a proposal that sought to ban sports, political, and other popular event contracts.
- Newly confirmed CFTC Chair Mike Selig criticized the prior Biden administration rule as a “frolic into merit regulation” and promised a new, pro-innovation approach.
- The agency also retracted a staff letter it said created “confusion and uncertainty” for market participants regarding sports betting contracts.
- Platforms like Polymarket and Kalshi argue they are regulated by the CFTC, while multiple states claim their markets constitute unlicensed gambling.
The US Commodity Futures Trading Commission, under newly confirmed Chair Mike Selig, officially withdrew a controversial proposal on Wednesday that would have banned popular prediction markets for sports and politics. This decisive move signals a major shift in regulatory policy for a high-growth sector of the crypto derivatives market.
Selig said the 2024 proposal “reflected the prior administration’s frolic into merit regulation with an outright prohibition on political contracts ahead of the 2024 presidential election.” Consequently, the CFTC will not issue final rules based on that withdrawn framework. It instead plans a new rulemaking grounded in a “rational and coherent interpretation of the Commodity Exchange Act.”
The agency also took down a September staff letter warning regulated entities about legal risks from sports event contracts. Selig stated the advisory had “inadvertently created confusion and uncertainty for our market participants.” He now looks forward to working with staff on a dedicated event contracts rulemaking.
This regulatory pivot directly affects platforms like Polymarket and Kalshi. These markets have surged in popularity by allowing bets on diverse events beyond finance. Meanwhile, they face ongoing legal challenges from states alleging unlicensed gambling, which the platforms vigorously dispute by citing exclusive CFTC oversight.
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