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CFTC Withdraws Draft Rule on Political Prediction Markets, Signaling Regulatory Shift

Mike Selig, the newly appointed chairman of the U.S. Commodity Futures Trading Commission (CFTC), has announced the withdrawal of a 2024 draft rule that sought to ban political event contracts in prediction markets, signaling a potential change in the agency’s regulatory direction.

According to NS3.AI, the proposal—introduced under the previous administration—had drawn significant criticism from industry participants and legal experts, who labeled it a “policy overreach.” Critics argued that the rule would have unnecessarily restricted innovation in prediction markets and limited their role in price discovery and risk hedging.

The now-withdrawn draft rule aimed to prohibit contracts tied to political outcomes, citing concerns over market integrity and public interest. However, opponents contended that existing regulatory frameworks were sufficient to address these risks without imposing a blanket ban.

Chairman Selig’s decision to retract the proposal suggests a more pragmatic and flexible regulatory stance toward prediction market contracts. Market observers view the move as an early indication that the CFTC under new leadership may prioritize market innovation and regulatory clarity over broad prohibitions.

The withdrawal is expected to be welcomed by prediction market platforms and participants, particularly as interest in event-based contracts continues to grow amid heightened political and economic uncertainty.

While the CFTC has not yet outlined a replacement framework, the move opens the door for continued development of political event contracts under existing oversight, potentially reshaping the future landscape of U.S. prediction markets.

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