Commodity Futures Trading Commission abandons proposed sports contracts ban

Abi Bray

30 January 2026 at 7:40am UTC-5

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The Commodity Futures Trading Commission has announced a policy shift away from a previously proposed ban on events contracts tied to sports outcomes.

On January 29, the commodities regulator’s Chairman Michael Selig directed staff to withdraw a 2024 proposed rule banning trades on sports and political outcomes and to remove a 2025 advisory related to sports contracts.

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The policy change comes amid growing legal disputes between prediction market platforms and state gambling regulators. Several US states have attempted to block these platforms from offering sports contracts to their citizens, as they argue they resemble illegal sports gambling.

Selig said, “Despite their history, many view them as novel or unsettled, and that uncertainty has not served our markets, nor has it served the public interest.”

He also hinted that the Commission may get more involved with the legal battles between states and these platforms, describing the existing regulatory framework as outdated and difficult to apply, saying clear standards would reduce legal ambiguity.

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In a nationwide class-action lawsuit back in November, prediction platform Kalshi was accused of providing illegal sports betting.

Prediction markets let users take positions on future outcomes, including sports, politics, and other real-world events. Platforms like Kalshi and Polymarket have argued that they fall under federal governance and thus individual states do not have the right to block their platforms.

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The Backstory

Why the pivot on sports event contracts matters

The Commodity Futures Trading Commission’s retreat from a proposed ban on trading sports outcomes marks a decisive turn in a long, uneven fight over who governs prediction markets and how they should operate. The move comes after years of friction between federal derivatives oversight and state gambling controls, with platforms arguing their markets are federally regulated commodities and states insisting sports outcomes look like wagering. By pulling back a 2024 proposal to bar sports and political contracts and scrapping a 2025 staff advisory, the agency is signaling it will set clearer federal guardrails rather than default to restrictive interpretations.

The stakes have broadened as prediction platforms diversified beyond political binaries into sports, geopolitics and macroeconomic indicators. Legal challenges have also stacked up. A class-action suit last fall accused one platform of facilitating illegal sports betting. Several states tried to shut out sports contracts, prompting a patchwork of access and confusion for users and intermediaries. The CFTC’s shift suggests the agency aims to reduce that uncertainty by defining what qualifies as a permissible event contract and who can offer them, potentially displacing state-by-state confrontations with a nationwide framework.

The timing reflects a maturing market. Institutional interest has increased, compliance programs have thickened and the market structure has edged closer to conventional derivatives. That evolution has raised the opportunity cost of a blunt ban and heightened the cost of ambiguity for platforms, brokers and counterparties.

Leadership change that set the stage

The policy turn follows a change at the top. President Donald Trump nominated Michael Selig to chair the CFTC, elevating a lawyer steeped in digital asset policy as the agency weighed a larger role in crypto and event markets. As reported in coverage of the nomination, Selig framed his mandate around modernization, competition and clearer rules. His selection aligned with a broader push in Congress for digital asset legislation, which could expand the CFTC’s remit and formalize market plumbing for tokenized and event-linked contracts.

Selig’s arrival brought urgency to a portfolio already crowded with lawsuits, contentious product applications and jurisdictional tests. The ban proposal became a proxy for a larger philosophical divide: whether event contracts should be treated as regulated instruments with social value, or dismissed as gambling with a veneer of financial engineering. Under new leadership, the agency is moving toward the first view, with an emphasis on standards, surveillance and intermediated access rather than outright prohibition.

Platforms pivot to compliance, capital and scale

While regulators debated, market operators retooled. Polymarket, which withdrew from the United States in 2022 after a fine for operating without proper registration, rebuilt its structure to fit within the CFTC rulebook. It acquired QCEX, a designated exchange and clearinghouse, for $112 million to secure the market, clearing and reporting infrastructure that federal oversight requires. The company then disclosed that it had received CFTC clearance to resume U.S. operations, describing an intermediated model with brokers and enhanced surveillance. Those steps were detailed in one account of the approval, which emphasized the exchange designation and upgrades to market supervision.

Another piece of coverage stressed that the green light arrived via a no-action letter following the QCEX deal, and situated the decision in a broader debate over whether these venues are policy tools or “digital casinos.” That perspective, and the suggestion that prediction markets could one day rival stock trading by harnessing dispersed information, appeared in a separate story on the relaunch. Both reports point to the same trend: platforms are opting into a supervised, exchange-cleared ecosystem to gain durability, liquidity and cross-market credibility.

Capital has followed. Strategic investors and data distribution partners have started to view event contracts as a new information layer for risk transfer and sentiment, not just a retail trading novelty. As more order flow moves through registered venues with clearing and surveillance, the regulatory argument for functional equivalence to other derivatives strengthens. That in turn puts pressure on rulemakers to define boundaries rather than default to bans.

Media tie-ups test conflicts and influence risks

As prediction markets seek mainstream adoption, partnerships with major news organizations have raised fresh oversight challenges. Congressman Abe Hamadeh urged the CFTC to scrutinize a tie-up between Kalshi and CNN, warning that letting a news outlet help shape or profit from markets on geopolitical events could create conflicts of interest and national security risks. He pressed the agency for details on how it is evaluating the arrangement under federal event contract rules and whether it has assessed potential influence operations. The concerns were laid out in the congressional inquiry and reflect a broader worry that media-integrated markets could distort coverage or perception around elections, war or crises.

The CFTC’s pullback from a categorical ban does not resolve these issues. Instead, it heightens the need for conflict safeguards, disclosure and surveillance protocols that account for informational advantages. If event contracts are to serve as public forecasting tools, market integrity will hinge on who lists markets, who sets rules, how data flows and whether participants with outsized influence face appropriate restrictions.

Legal friction in adjacent sports markets

The policy shift arrives as disputes over licensing and competitive fairness spill into adjacent segments. Fantasy sports operator Sleeper Markets sued the CFTC and Acting Chair Caroline Pham, claiming the agency interfered with its bid for a futures commission merchant license. Sleeper alleges the National Futures Association deemed its application complete, then left it unresolved after CFTC intervention, even as a rival advanced. The complaint, outlined in the company’s lawsuit, frames the episode as unequal treatment that harms a new entrant in the growing sports-linked markets space.

The case underscores how regulatory bottlenecks can shape market structure as much as formal rulemaking. If the CFTC is now favoring clear, uniform standards for event contracts, it may have to tighten and clarify its own licensing timelines and criteria to prevent perceived favoritism. The outcome of Sleeper’s suit could influence how quickly intermediaries can onboard clients for event products and whether smaller firms can compete on a level field.

What to watch from here

With the ban proposal shelved, the CFTC’s next steps will determine how event contracts scale in the U.S. Expect guidance on what constitutes permissible subject matter, how exchanges must surveil sports and political markets, and what conflicts or market manipulation risks require special controls. Leadership continuity matters, and Selig’s agenda, previewed in his nomination coverage, points to codifying innovation within a clearer framework.

Platforms that invested in intermediated, cleared models, as shown by Polymarket’s exchange-based redesign and its regulatory go-ahead, appear positioned to benefit. But scrutiny of media partnerships, political markets and sports integrity will intensify. The agency’s willingness to replace prohibition with standards could unlock liquidity and institutional participation, yet it also raises the bar for compliance, disclosure and enforcement. The next phase will test whether prediction markets can deliver their promise—better information and risk transfer—without eroding trust in the events they trade.