The Commodity Futures Trading Commission (CFTC) is taking a decisive stand against what it describes as an “onslaught” of state-level regulations targeting prediction markets. In a recent video announcement, CFTC Chairman Michael Selig revealed that the agency has filed a “friend of the court brief” in favor of Crypto.com, which is embroiled in a legal showdown with Nevada regulators. This intervention is notable as it marks the first time under Selig’s leadership that the CFTC has aligned itself with a private entity in the contentious battle over the future of prediction markets.
Selig emphasized that the CFTC contends prediction markets should be federally regulated and not fall under the jurisdiction of state gambling laws. “Over the past year, American prediction markets have been hit with an onslaught of state-led litigation,” Selig stated. He added that the CFTC would no longer remain passive while state governments impose restrictive measures on these markets, which he described as innovative products.
The debate surrounding the regulation of prediction markets has gained urgency as their popularity surges. For instance, Kalshi reported that Super Bowl 60 generated over $1 billion in total trading volume, a staggering increase of 2,700% compared to the previous year. Concurrently, multiple states, including Massachusetts and Nevada, have initiated lawsuits, issued cease-and-desist orders, and argued that these platforms resemble unlicensed gambling.
In response to the CFTC’s actions, Utah’s Republican Governor Spencer Cox berated Selig via social media, asserting that prediction markets unequivocally constitute gambling and expressing his intent to leverage every resource at his disposal to challenge the CFTC. “These prediction markets you are breathlessly defending are gambling—pure and simple,” he stated, citing the negative impact they have on families and young men.
Conversely, Senator Bernie Moreno of Ohio, sharing Republican affiliation with Cox, publicly supported Selig’s announcement, underscoring the need for clear regulatory frameworks to foster American innovation in this area.
Selig’s statement comes on the heels of correspondence from a coalition of Democratic senators, led by Nevada’s Catherine Cortez Masto, in which they urged the CFTC to refrain from involvement in ongoing legal matters concerning contracts linked to sports or other controversial events. As states push to impose their regulations on these burgeoning platforms, the fundamental question has transitioned from determining if these products constitute gambling to who ultimately has the authority to make that decision.
Proponents of prediction markets argue that these platforms should not be classified as gambling, which is conventionally regulated at the state level. They maintain that prediction markets function as financial exchanges where users trade contracts amongst themselves, rather than wagering against a “house.” Unlike traditional gambling platforms, these exchanges do not set odds or take opposing sides in trades but instead collect transaction fees akin to those charged by brokerages.
In his closing remarks, Selig articulated the potential benefits of prediction markets, asserting that they enable Americans to manage commercial risks, such as fluctuations in temperature and energy prices, while also serving as vital checks on media narratives and information dissemination. He concluded the video by warning state attorneys general involved in the ongoing legal disputes: “To those who seek to challenge our authority in this space, let me be clear: We will see you in court.”
