NEW YORK — February 1, 2026 — The prediction market industry has entered a pivotal new phase this weekend, marked by a stunning regulatory reversal and record-breaking trading volumes. In a move that has sent ripples through the political betting landscape, the Commodity Futures Trading Commission (CFTC) has signaled it is stepping back from its aggressive posture toward event contracts.
Regulatory Pivot: The End of the "Hostile Era"?
For years, platforms like Kalshi and Polymarket operated under the looming threat of federal crackdowns. However, reports confirmed late this week that CFTC Chairman Michael Selig is fundamentally shifting the agency's approach. According to internal memos and public statements, the sole federal regulator over prediction markets says it is easing off, effectively ending the push to ban political and sports-related contracts.
Further cementing this shift, the agency has formally withdrawn a proposed rule that would have categorically banned event contracts involving political contests and gaming. As reported by Corporate Compliance Insights, Chairman Selig announced the withdrawal to clear the path for a more nuanced regulatory framework, stating it was "time for clear rules" rather than blanket prohibitions.
Volume Surge: A $5 Billion Week
The regulatory thaw coincides with an explosion in trading activity. According to data from the DeFi Rate Prediction Market Volume Tracker, total weekly notional volume across major platforms reached $5.23 billion for the week ending in mid-January, a trend that has accelerated into February.
Polymarket continues to dominate the decentralized space. The platform recorded a 24-hour volume of $304.5 million and a 7-day rolling volume of $1.8 billion. Meanwhile, the regulated exchange Kalshi is closing the gap, posting a 24-hour volume of $199.1 million—a 55.6% increase.
For traders looking to analyze these liquidity flows in real-time, Prediction Market Tools offers essential analytics to track volume disparity between decentralized and regulated exchanges.
The Super Bowl Divide
As the NFL season concludes, a stark divergence has emerged between the platforms regarding sports coverage. While Kalshi has aggressively listed Super Bowl markets, capitalizing on its regulated status, Polymarket's US interface remains devoid of them. As noted by Next Event Horizon, this highlights the ongoing compliance tightrope: Kalshi is leaning into its CFTC designation to capture institutional sports volume, while Polymarket remains the king of global political liquidity.
Kalshi has also been on what industry insiders call a "compliance PR tour," attempting to differentiate itself from offshore crypto-native competitors amidst backlash from state gambling regulators, according to Sportico.
Market Watch: Fed Chair & Tariffs
Beyond the regulatory drama, traders are focused on high-stakes political contracts. The race for the next Federal Reserve Chair nominee has created significant divergence between platforms:
- Polymarket: The market is fractured, with Rick Rieder leading at 36%, followed closely by Kevin Warsh at 31%.
- PredictIt: In a stunning display of platform isolation, PredictIt traders have priced Kevin Warsh at 97 cents, suggesting a near-certainty that is not reflected on the blockchain-based markets.
Additionally, the economic impact of the new administration is being heavily traded. On the question of whether the Supreme Court will allow Trump's tariffs, over $12 million has been bet across platforms. Election Betting Odds data shows a tight consensus, with Polymarket giving the "Yes" side a 67% chance compared to Kalshi's 64%.
With the government shutdown deadline passing this weekend, markets have already priced in a disruption, with Polymarket contracts showing a 97% probability of the shutdown lasting 4+ days. As February begins, the prediction market ecosystem is not just surviving regulatory scrutiny—it is thriving because of it.