Michael Selig, the new commissioner of the Commodity Futures Trading Exchange, has announced he will be reviewing the traditional CFTC rules and protocols, a move closely watched by sports betting operators, which could include a clear perspective on prediction trading platforms and their roles in sports event contracts trading.
Future Proof Initiative
Newly appointed CFTC chairman Michael Selig recently penned an op-ed piece in the Washington Post stating his agency would bring an evolving set of rules that would set guidance and “future-proof its approach to regulation.”
The opinion article was predicated on the growth of blockchain as well as “advances in technology (that) are transforming the financial services landscape as we know it.” Although Selig steered clear of outlining any definitive reforms or guidance regarding prediction platforms like Kalshi, Polymarket, and Crypto.com, to name a few, many believe his agency will eventually wade into these deeply contentious and litigious waters.
Outdated Rules And New Market Realities
The original rules were focused on agricultural markets, but those protocols have not evolved to manage the many new markets under the organization’s purview. Cryptocurrency did not exist when the rules were initially written, nor do they offer any role that the CFTC would play regarding the shift from gold, silver, and pork bellies to sports event contracts that mirror sports betting offerings seen by the nation’s sportsbooks in those regulated markets.
“Decades-old rules designed for pork bellies and wheat futures do not contemplate blockchain-native markets that trade 24/7,” Selig said. “The CFTC must meet innovators where they are.”
Call For Congressional Action
Selig also called upon Congress to enact new legislation that would provide financial regulators with a clearer understanding of the new policies implemented to govern these new markets and establish regulatory frameworks for these new industries.
“If Congress passes market structure legislation and hands us the torch, we will ensure these markets flourish at home,” Selig stated. “The great innovations of today and tomorrow should be made in America.”
NCAA Calls on CFTC to Address Prediction Markets
Former Massachusetts governor and current NCAA President Charlie Baker submitted a letter to the CFTC, requesting its intervention on prediction markets offering contracts for college sports events. Baker has asked that all prediction markets be banned from offering such products on college sports until guardrails have been installed to protect the integrity of the games and the welfare of the student athletes.
“Just as we need Congress to stabilize eligibility, we need federal regulators to stabilize these markets. The answer cannot be the status quo. We need one set of fair, transparent standards,” Baker wrote to the CFTC.
The prediction platforms, unlike sportsbooks, are able to list contracts on political races, and proposals are in the works to offer contracts on college athletes’ transfer portal decisions. The fear is that those instruments could be used to steer an athlete toward choosing one school over another for financial gain or out of intimidation.
Federal Authority Shields Prediction Markets
As it stands, the prediction platforms, governed by the federal authority of the CFTC and not state regulators, have won early legal battles with the states that oppose them, allowing the prediction markets to continue offering sports event contracts in all 50 states.
Michael Selig has previously stated he would prefer that the courts decide whether sports event contracts can be offered by prediction platforms without licenses from the state regulatory agencies that oppose them or the obligation to pay state taxes.
