CFTC Chairman Announces New Rules for Prediction Markets Being Drafted
Commodity Futures Trading Commission chairman Michael Selig has stated his agency will draft new rules that will clarify guidance on its prediction market licensees in the wake of new technology, digital currency, and perhaps sports event contracts.
Point-Counterpoint
Prediction markets have been offering sports event contracts for over a year, and the legal battle has been raging between state gaming commissions, which license retail and mobile sportsbooks, and prediction market platforms like Kalshi, Crypto.com, and Polymarket, which all offer sports event contracts.
The state regulators argue that the prediction contracts for sports events being offered are tantamount to the same point spreads and odds posted by mobile sportsbooks, which are cannibalizing their respective gaming industries.
Because the prediction platforms are unlicensed, they do not pay licensing fees or state taxes on revenue from sports event contracts within those states.
The prediction markets counter that they are licensed by the Commodity Futures Trading Commission (CFTC), whose federal authority supplants that of the state and can therefore operate nationwide, unfettered by state laws and regulations.
It has manifested in a contentious legal battle that has seen the prediction markets win early victories, but Polymarket recently suffered a setback in Nevada when a federal judge issued a temporary injunction that has seen the platform withdraw from the Silver State, at least temporarily.
Prediction Pivot?
Throughout the maelstrom of legal warfare, the CFTC has remained neutral. Since the Trump administration took office, the CFTC has been far less eager to wade into the dispute, and the recently appointed chairman, Michael Selig, testified during his confirmation hearings that he was inclined to let the legal system adjudicate the debate.
However, the recent announcement that his agency would be rewriting the rules was taken by many as a signal that those new protocols could include the CFTC’s perspective on prediction markets offering the controversial sports event contracts throughout the nation.
Selig has announced the withdrawal of proposed rules that would have prohibited CFTC licensees from offering political and sports event contracts. Those unfinalized rules were drafted in 2024, and, in addition, a staff advisory letter written in 2025 regarding the tenuous legality of licensees offering sports event contracts was also shelved.
“While the advisory was issued at the staff level with the intent of bringing awareness to the litigation, it has instead contributed to uncertainty in our markets,” Selig said.
Selig also added, “For too long, the CFTC’s existing framework has proven difficult to apply and has failed our market participants. That is something I intend to fix by establishing clear standards for event contracts that provide certainty to market participants.”
Selig has directed his staff to “reassess” the agency’s hands-off approach regarding the litany of legal turmoil swirling around state gaming agencies and the CFTC’s prediction markets. This could be the first glimpse into how Selig intends to navigate these tumultuous legal waters moving forward.
