US Regulator Reverses Prediction Market Ban in Crypto Regulation Reset

That reaction mirrored a broader legal debate around crypto regulation overlap. States pursued enforcement actions while platforms asserted federal preemption. The withdrawn proposal reduced one source of uncertainty but did not end jurisdictional disputes.

Crypto.com and similar platforms argued their products operated within existing derivatives rules. They said contracts settled on objective outcomes, not chance. The CFTCs change in tone strengthened that argument.

Crypto Regulation: Staff Guidance Also Pulled Back

The commission also withdrew a September staff advisory tied to sports event contracts. That letter warned regulated entities to prepare for litigation risks and operational stress.

It arrived during a period of federal shutdown uncertainty. Selig said the advisory aimed to flag legal exposure but produced unintended effects.

He noted it created uncertainty among crypto market participants. The withdrawal suggested the commission wanted clearer, centralized guidance.

This move followed criticism that staff letters blurred the line between guidance and policy. Firms said such communications increased compliance costs without formal rulemaking. The rollback aligned with Seligs emphasis on coherent interpretation.

Broader Crypto Regulation Signals

The reset in the crypto regulation extended beyond prediction markets. Public comments from CFTC leadership pointed to broader changes in crypto oversight. Those remarks fed expectations of legislative progress on market structure.

Invest Alpha Pro cited Selig saying a crypto market structure bill neared passage. The comment came amid renewed congressional focus on digital asset regulation. Industry groups have long pushed for clearer statutory frameworks.

Pete Rizzo reported Selig echoed that view during a televised interview. He said crypto market structure rules could see rapid global adoption. Such statements positioned the CFTC as supportive of formalized crypto oversight rather than enforcement-first tactics.

Implications for Crypto News and Platforms

This development reshaped crypto news narratives around U.S. regulation. Rather than expanding prohibitions, regulators signaled recalibration. That mattered for platforms integrating crypto rails with derivatives-style products.

Prediction markets like Polymarket and Kalshi benefited indirectly. Although not named in the withdrawal, their business models depended on permissive interpretations.

The absence of a categorical ban preserved room for operation. Polymarket and Kalshi continued to argue their contracts served price discovery and risk transfer.

The stance of the US CFTC weakened arguments framing them as illicit gambling venues.

Meanwhile, the commission said it would pursue a new crypto regulation rulemaking on event contracts. That process will test how regulators balance innovation with statutory limits.

Near-term focus shifted to congressional action on crypto market structure, which now sets the policy timeline.