The U.S. Commodity Futures Trading Commission (CFTC) is rapidly transforming its stance on prediction markets, just days after its chairman Michael Selig presented an agenda focused on innovation and regulatory clarity. The commission decided to withdraw key documents that limited the development of these platforms, marking a notable shift from previous positions.
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Removal of Previous Controls on Prediction Markets
The CFTC announced the withdrawal of two fundamental documents: an internal 2025 advisory note on legal considerations for prediction markets and a 2024 proposed regulation on event contracts. These actions effectively remove the controls the commission had in place against the growth of these controversial platforms.
Previously, the agency had also abandoned its legal challenge against election betting, consolidating a pattern of openness towards this sector.
Criticism of the Previous U.S. Administration
Selig justified the measures as reflecting the “CFTC’s commitment to legal innovation,” echoing arguments from his recent speech. He criticized the 2024 proposal for “attempting to engage in merit-based regulation” and promised new regulations “based on a rational and coherent interpretation” of existing legislation.
Regarding the withdrawn internal note, which warned licensees about potential market lawsuits, Selig stated that it “inadvertently created confusion and uncertainty for market participants.”
Ongoing State Legal Battles
The new federal stance intensifies conflicts with U.S. state governments. Several states and tribal entities have sued prediction market operators in state and federal courts, questioning fundamental aspects of their operation.
The cases address key questions: Does the Commodity Exchange Act (CEA) prohibit sports event contracts? Did Congress intend for the CFTC to regulate betting? Can states and tribes prevent these contracts in their territories?
Selig suggested that the commission might intervene in these lawsuits, this time supporting the sector. He stated that the CFTC has “the expertise and responsibility to defend its exclusive jurisdiction over commodity derivatives.”
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Expansion into Digital Assets
In parallel, the Trump administration is pushing legislation that would significantly expand the CFTC’s powers. The Digital Commodity Intermediary Act, currently in the Senate Committee on Agriculture, Nutrition, and Forestry, would grant new responsibilities to the agency.
The bill includes new definitions of digital commodities, consumer protections against conflicts of interest, a registration regime for “liquid and resilient onshore regulated markets,” and requirements for collaboration between the CFTC and the Securities and Exchange Commission (SEC).
It also includes protections for software and technology companies, as well as additional funding for the CFTC to “establish a spot market regulatory regime.”
Prediction Market Sector Outlook
Senator John Boozman, chairman of the Agriculture Committee, called the advancement “a crucial step towards creating clear rules for digital asset markets.” Boozman emphasized that the bill “protects consumers and allows for the development of innovation and American businesses.”
Another related bill, the Digital Asset Market Clarity Act of 2025, faces opposition from crypto sectors and remains stalled in the Senate Banking Committee.
Selig’s agenda includes four main points: withdrawing previous guidance, proposing new rules, strengthening collaboration with the SEC, and re-evaluating participation in active court cases. The coming months will determine whether this regulatory transformation prospers or faces significant legal and political resistance.
