The Commodity Futures Trading Commission (CFTC) is set to establish new regulations for the rapidly evolving prediction markets sector, as confirmed by its chairman on Thursday. This announcement follows the withdrawal of previous proposals aimed at limiting trades related to sports and political events.

CFTC Chairman Michael Selig stated that the commission aims to provide better clarity in the regulation of event-based contracts, contending that the absence of clear regulations has stifled market growth and not benefitted the public.

“It’s essential to create transparent rules and communicate that the CFTC endorses lawful innovations within these markets,” Selig emphasized in his prepared remarks. “In line with my dedication to supporting responsible innovation in crypto asset markets, I will continue to champion the ethical development of event contract markets.”

Prediction markets enable traders to place binary bets on future events, encompassing elections, economic data, sports, and cultural awards. Initiatives like Kalshi and Polymarket have experienced a significant uptick in activity recently, attracting scrutiny from state regulators and tribal authorities.

“Despite their established history, many still view them as unconventional, and such ambiguity has adversely affected our markets, as well as the public interest,” Selig noted during a joint event with Securities and Exchange Commission Chairman Paul Atkins.

Selig mentioned that he has instructed staff to retract a proposed 2024 regulation that would’ve prohibited contracts associated with sports and politics, as well as to annul a 2025 advisory that advised caution regarding sports-related event contracts.

“Although the advisory was intended to raise awareness regarding pending litigation, it has inadvertently contributed to market uncertainty,” Selig remarked.

Contracts tied to live sports have drawn parallels with the legalization of sports betting across the United States. State regulators and attorneys general assert that they hold the jurisdiction to regulate sports wagering, while tribal nations have asserted their authority over gambling activities on tribal land.

Kalshi maintains that its offerings are federally regulated derivatives and not classified as gambling, thus falling under the jurisdiction of the CFTC.

Selig indicated that the agency might adopt a more proactive stance in federal court cases involving prediction markets, where issues of jurisdiction are being challenged.

“In situations where jurisdictional matters arise, the Commission has both the expertise and duty to defend its exclusive authority over commodity derivatives,” he stated.

Selig also committed to enhancing collaboration with the SEC regarding the oversight of crypto assets, credit swaps, and other emerging financial instruments.

“As we navigate the new financial landscape, regulators must consistently modernize, align, and future-proof their regulatory frameworks,” Selig asserted, adding that investor protection, anti-fraud measures, and maintaining market integrity will remain fundamental priorities.

The Coalition for Prediction Markets (CPM) welcomed this initiative, expressing that the rescission of prior guidance and a commitment to thorough rulemaking will aid in fostering market clarity and responsible innovation.

Selig’s statements marked his first public address since assuming his role as CFTC chairman.