CFTC reverses 2024 ban with new prediction market rules

The CFTC under Chair Michael Selig will propose rules Wednesday allowing most sports-related event contracts while blocking bets on war, terrorism and assassinations, reversing the agency's 2024 prohibition on sports betting.

"The proposal doesn't outright ban trading on any specific types of event contracts, but rather outlines factors that regulators will use to review certain types of contracts on a case-by-case basis," people familiar with the matter told the Wall Street Journal.

The rules would prohibit bets on player injuries, first-pitch gambling, war, terrorism and assassinations on grounds they are susceptible to manipulation or not in the public interest. Kalshi, a CFTC-registered designated contract market since 2020, and Polymarket, which achieved DCM status in 2025, stand to benefit from federal preemption of state-level gambling laws.

The proposal marks the CFTC's most significant attempt to regulate a market that exploded during the 2024 election cycle. With the OMB review underway and a formal comment period ahead, final rules could take months to implement — but the direction is clear: the U.S. is moving toward federal oversight rather than prohibition.

The proposed rules, which entered review at the White House Office of Management and Budget around May 26, build on an Advance Notice of Proposed Rulemaking issued in March. The comment period on that earlier document closed April 30. President Trump publicly endorsed the CFTC's exclusive federal authority over prediction markets in a Truth Social post on May 26, calling for an end to state-level interference.

The framework departs sharply from the approach under the previous administration. In 2024, the CFTC banned various sports-related event contracts, grouping them with categories deemed too close to gambling. The new proposal takes the opposite view: bring them under federal oversight rather than ban them outright.

Who Benefits, Who Loses

Kalshi, which has operated as a CFTC-registered designated contract market since 2020, has spent years navigating a patchwork of state laws. Federal preemption would remove many of those obstacles. The platform has already moved to get ahead of the new rules, requiring some users to disclose their employer identities, the Journal reported.

Polymarket, the blockchain-based platform that became a household name during the 2024 election, achieved DCM status in 2025. The platform has a data partnership with Dow Jones, publisher of the Journal. Polymarket has not yet launched a native POLY token, meaning regulatory clarity could influence how and when that token comes to market.

The Trump family has itself taken a financial interest in the sector, with one of Trump's sons serving as an adviser to both Kalshi and Polymarket.

The Limits of Permissiveness

While the CFTC is broadly permissive, the proposal carves out clear exceptions. Bets on war, terrorism and assassinations would likely be prohibited on public interest grounds. A U.S. soldier was charged in April over trades he allegedly made around the operation that led to the arrest of Venezuelan leader Nicolas Maduro, highlighting the risks of information asymmetry in geopolitical event contracts.

Sports-related bets on player injuries and first-pitch gambling — the type that ensnared an all-star Major League Baseball pitcher — would also face scrutiny under the case-by-case review framework.

The CFTC's stance has drawn bipartisan pushback. In March, lawmakers introduced legislation to prohibit U.S.-regulated prediction markets from listing contracts related to sporting events and casino-style games. Most U.S. professional sports leagues have embraced sports gambling, though some remain cautious on prediction markets. Major League Baseball earlier this year signed a licensing deal with Polymarket.

The rules proposed Wednesday are unlikely to be the last. The agency is weighing additional rules aimed at protecting retail traders, people familiar with the matter said. Once the OMB review clears, the proposal moves to formal rulemaking with another public comment period and potentially months of revisions before final rules take effect.

This article is for informational purposes only and does not constitute investment advice.