Depends on what mode you're using. If set to Internal then the categories are specified directly in the same parameters as a comma separated list. If set to Joomla then it just pulls them directly from Joomlas Content component. Edit CB Blogs within CB > Plugin Management and under Parameters > Blogs verify what Model you have selected. If using Joomla be sure you've selected your top level category for the Category parameter as this will determine what categories are available to users. Typically you'd have something like the following setup in Joomla content component.
Blogs
- General
- Movies
- Games
- Sports
Then you'd set Category to "Blogs". This would make General, Movies, Games, and Sports available categories for your users to select.