CFTC Nominee Non-Committal on Sports Event Contract Trading

Michael Selig, the nominee for chairperson of the Commodity Futures Trading Commission, sat before the Senate Agriculture, Nutrition, and Forestry Committee last week, deftly deflecting questions regarding his stance on sports event trading contracts and their implications for sports betting operators that have rankled state gaming authorities and have triggered legal battles throughout the nation.

Let the Supremes Decide

If the likes of Caesars and BetMGM were hoping for a life raft, they didn’t get it after listening to testimony from Michael Selig, currently the chief counsel of the SEC Crypto Task Force, during his confirmation hearing. Selig repeatedly stated he didn’t have an opinion one way or the other on firms like Kalshi and Polymarket offering sports event contracts in all 50 states.

Instead, Selig deferred to the courts and stated he believed it was within their legal purview to adjudicate the matter. The topic has already been brought before several federal courts, where the prediction trading platforms have scored early victories.

Senators Seek Answers

When pressed by Senator Tina Smith of Minnesota as to whether Selig would enforce the CFTC’s authority over state regulators, the nominee was non-committal, stating, “As someone who spent many years practicing law at law firms as well as studying the law in law school, these are complex issues as to interpretation of what it means to constitute gaming,” Selig said. “And, of course, I have the utmost respect for our judges working on these issues in our court system, and I intend to always adhere to the law and follow what judicial decisions tell me to follow.”

Senator Adam Schiff of California was also inquisitive, trying to pry unambiguous clarification from Selig, but didn’t get much further than Senator Smith.

“Many lengthy legal opinions have been written on one word in a statute, and I would really want the benefit of understanding what the judges think about the issue. This could be one that works its way all the way up to the top, and so I’ll look to the courts to the issue.”

Selig was clearly alluding to the Supreme Court, which won’t get to hear the matter for what many believe will be approximately two years.

Maryland Scores a Win

Although the federal courts have been amenable to Kalshi’s definition that these are not sports bets but rather trading contracts, it should be noted that in a Maryland state court, Judge Adam Abelson agreed with the state gaming authorities, ruling that Kalshi’s sports contracts were nothing more than camouflaged sports bets, no different than those wagers one would place with a sportsbook.

But that wasn’t the end of prediction markets in the Old Line State, as Maryland officials agreed to wait until a federal appeals court could hear the case later this year or early next. Therefore, the Fourth Circuit federal ruling will be the litmus test between the federal authority of the CFTC versus state gambling laws governed by the regulatory agencies.

However, if we hearken back to what Selig wrote when he was a lawyer for Willkie Farr & Gallagher LLP, he stated in a July 2024 letter that banning sports event contracts was “arbitrary and capricious.”

Selig was later approved, 12-11, in a strictly partisan vote of a dozen Republicans and 11 Democrats. The full Senate will vote on his confirmation at a later date.