CFTC Kills ‘Event Contract’ Ban; Prediction Markets Eye $100B Year
CFTC Chair Selig withdraws the 2024 ban on election and sports contracts, sparking a volume war between Kalshi and Polymarket as regulatory focus shifts to state gaming laws.
Federal “Cloud of Doom” Lifts for Kalshi & Polymarket
The regulatory overhang that has choked U.S. prediction markets for two years just vanished. In a decisive move Wednesday, the CFTC formally withdrew its contentious 2024 “Event Contracts” proposal, effectively ending the federal push to categorize election and sports markets as illegal gaming. The agency also rescinded Staff Advisory 25-36, a 2025 guidance document that had created “confusion and uncertainty” for exchanges listing sports derivatives.
CFTC Chair Michael S. Selig did not mince words regarding the previous administration’s strategy.
The 2024 event contracts proposal reflected the prior administration’s frolic into merit regulation with an outright prohibition on political contracts… The Commission is withdrawing that proposal and will advance a new rulemaking grounded in a rational and coherent interpretation of the Commodity Exchange Act.
Volume Wars: The Floodgates Open
The reversal is immediate rocket fuel for a sector already posting record numbers. With the federal threat neutralized, the battle for liquidity between compliant heavyweights and offshore giants is intensifying. Kalshi, which processed an estimated $9.1 billion in January alone, currently leads the volume war, with nearly 91% of that activity driven by sports contracts. Polymarket trails closely with $7.5 billion, maintaining its dominance in geopolitical forecasting.
Operators are wasting no time. Crypto.com announced its dedicated “OG” prediction platform this week, and traditional brokers are reportedly preparing integration pitches. The signal is clear: prediction markets are no longer a niche hobby for superforecasters. They are a multi-billion dollar vertical.
The New Boss: State Regulators
While the CFTC has stepped back, the “regulatory moat”, it has merely shifted jurisdictions. As federal pressure eases, state gaming commissions are aggressively filling the void. Regulators in Nevada and Connecticut have already issued cease-and-desist orders, arguing that these derivatives function as unlicensed sports betting.
Traders are now pricing in a new risk: geofencing. The CFTC’s pivot to “responsible innovation” solves the existential federal crisis, but it leaves platforms fighting a guerrilla war state-by-state. The federal ban is dead. The state battles have just begun.
