A New Era for Event Contracts
In a watershed moment for the prediction market industry, newly appointed Commodity Futures Trading Commission (CFTC) Chairman Michael Selig signaled a definitive end to the agency's historical hostility toward event contracts. Speaking at a joint harmonization event with the SEC in Washington D.C. on Thursday, Selig explicitly stated that the Trump administration would support the growth of regulated prediction markets.
For traders and platform operators who have spent years navigating regulatory gray areas, Selig's comments mark a structural shift in the U.S. financial landscape. "It’s time for clear rules and clear understanding that the CFTC supports lawful innovation in these markets," Selig said, according to reports from iGaming Business. He further confirmed that the commission intends to withdraw previously proposed limits on political and sports event contracts, replacing them with a "broader rewrite" of prediction market rules.
This pivot comes as platforms like Polymarket and Kalshi continue to process billions in volume. The industry has long argued that event contracts offer vital hedging mechanisms and information discovery—a view the new CFTC leadership now appears to embrace.
Federal Green Light, State-Level Red Tape
While the federal outlook has brightened significantly, operators still face headwinds at the state level. As the CFTC moves toward a more permissive stance, local jurisdictions are pushing back against the expansion of event wagering.
In Massachusetts, a judge is currently weighing an injunction that would force regulated exchange Kalshi to block users within the state from accessing its sports markets. According to Gambling Insider, the judge is considering granting Kalshi a 30-day window to implement geofencing technology to comply with state gaming laws. This highlights a growing divergence: while federal derivatives regulators may view these as financial contracts, state attorneys general often view them through the lens of gambling prohibitions.
Market Movers: Shutdowns, Tariffs, and NFL
Amidst the regulatory news, trading volume on major platforms remains robust, driven by domestic instability and economic policy speculation.
On Polymarket, the world's largest prediction market, the immediate focus is on Washington. The contract asking "US government shutdown Saturday?" has exploded in activity, generating over $27 million in volume. As of Friday morning, traders are pricing in a 56% chance of a shutdown by the January 31 deadline, reflecting deep skepticism about a last-minute congressional deal.
Economic policy markets are seeing similar liquidity. A contract regarding whether the Supreme Court will allow President Trump's tariffs has attracted over $12 million in bets. Data aggregators like Election Betting Odds show a tight spread between platforms, with Kalshi traders slightly more pessimistic about the tariffs standing than their offshore counterparts.
Sports markets are also maturing into high-volume financial instruments. The upcoming Seahawks vs. Patriots NFL matchup has already seen $5 million in volume on Polymarket alone, suggesting that sports liquidity is becoming sticky even outside of traditional sportsbooks.
The Road Ahead for 2026
The first month of 2026 has set a volatile but promising tone. With the CFTC promising a new regulatory framework, the uncertainty that plagued platforms in previous years may soon dissipate, potentially opening the door for institutional capital to enter the space. However, the legal battle in Massachusetts serves as a reminder that regulatory clarity at the federal level does not guarantee immunity from state-level intervention.
For traders looking to stay ahead of these regulatory arbitrage opportunities and track liquidity across fragmented exchanges, visiting Prediction Market Tools remains essential for data-driven decision making.