Feb 26, 2026 CFTC Reverses Course on Event Contracts: What the New 2026 Ruling Means for Prediction Markets The regulatory landscape for prediction markets and event contracts underwent a seismic shift on February 4, 2026. In a move that has caught the attention of the entire sector, the Commodity Futures Trading Commission (CFTC) officially announced a major reversal of previous policies. According to CFTC Chairman Michael S. Selig, “The 2024 event contracts proposal reflected the prior administration’s frolic into merit regulation… The Commission is withdrawing that proposal and will advance a new rulemaking grounded in a rational and coherent interpretation of the CEA.” The End of the “Political Contract Ban”: A Regulatory Timeline To understand the impact of the 2026 announcement, we must look at the transition from strict prohibition to a more open, “rational” interpretation of the law. May 10, 2024: The Initial Crackdown In mid-2024, the CFTC issued a Notice of Proposed Rulemaking (NPRM) aimed at defining which event contracts were “contrary to the public interest.” This proposal attempted to categorize political contests, awards shows, and athletic competitions as “gaming.” Under Section 5c(c)(5)(C) of the Commodity Exchange Act (CEA), the proposal sought to prohibit: Gaming (Broadly defined to include elections and sports) War, Terrorism, and Assassination Unlawful Activities September 30, 2025: The “Confusion” Advisory Regulatory clarity hit a snag in late 2025. The CFTC issued Staff Letter 25-36, an advisory intended to warn market participants about disruptions during potential government shutdowns. However, Chairman Selig noted this advisory inadvertently created “confusion and uncertainty” regarding the legality of sports event contracts. February 4, 2026: The Major Pivot The CFTC has now officially: Withdrawn the June 2024 Proposal: The rulemaking that would have banned political betting is effectively dead. Retracted Staff Letter 25-36: The 2025 advisory that clouded the sports contract market is no longer in effect. Why This Shift Matters for Market Participants This reversal is a landmark victory for Designated Contract Markets (DCMs) and Derivatives Clearing Organizations (DCOs). The CFTC is signaling a return to the core principles of the Commodity Exchange Act. The CFTC’s “return to core principles” signals a shift from rigid, prescriptive rules to a flexible, high-level framework focused on outcomes rather than technicalities. Instead of dictating exactly how a company must operate, the agency sets broad standards—such as preventing market manipulation and protecting customer funds—and allows firms to determine the most effective ways to meet them. This approach is designed to accommodate rapidly evolving technologies, like digital assets and prediction markets, by fostering innovation while maintaining federal oversight and market integrity. The Future of Event Contracts: Innovation Ahead The withdrawal of these notices doesn’t mean a lack of oversight; rather, it marks the start of a responsible innovation era. We expect upcoming rulemakings to focus on: Market Integrity: Protecting contracts from manipulation. Congressional Intent: Aligning the definition of “public interest” with the original legislative text. Scalability: Allowing platforms to list contracts on elections, economic indicators, and sports without the threat of a categorical ban. Face the New Regulatory Landscape with Turnkey Trading Partners Are you navigating the world of event contract registration? Whether you are building a new exchange, operating as a Futures Commission Merchant (FCM), acting as an Introducing Broker (IB), or representing any other category that interacts with event contracts, Turnkey Trading Partners can help. The shift in CFTC policy presents a unique window of opportunity, but staying compliant during a transition to “new rulemaking” requires expert guidance. We specialize in helping firms adapt to these legislative pivots and ensuring your registrations and operations meet the latest standards of the NFA, CFTC, and Commodity Exchange Act. For more info on how we can support your event contract goals, contact Turnkey Trading Partners today.