TLDR
- On Thursday, the CFTC released a staff advisory and launched formal rulemaking procedures for prediction market regulation
- CFTC Chairman Mike Selig, currently the commission’s only member, asserts the agency holds exclusive regulatory authority over prediction markets
- Major platforms including Kalshi, Polymarket, and Coinbase receive preliminary framework for operating within U.S. borders
- A recent Ohio court decision denied Kalshi’s attempt to prevent state gaming regulators from taking action, challenging federal jurisdiction claims
- Following Federal Register publication, stakeholders will have 45 days to provide feedback
The U.S. Commodity Futures Trading Commission has formally advanced its regulatory agenda for prediction markets through dual initiatives: publishing operational guidance and initiating a comprehensive rulemaking procedure that may fundamentally alter the sector.
CFTC Chairman Mike Selig unveiled these measures on Thursday, characterizing prediction markets as representing “one of the most exciting innovations in financial markets” while acknowledging the agency’s historical failure to establish regulatory clarity.
The commission published a staff advisory that categorizes event contracts on prediction platforms as a distinct financial asset class. Simultaneously, it filed an Advanced Notice of Proposed Rulemaking with the Federal Register, triggering a 45-day period for public input.
Prediction markets operate as trading venues where participants purchase and sell contracts based on binary event outcomes — ranging from electoral results to sporting events. Industry participants such as Kalshi, Polymarket, and Coinbase operate under CFTC oversight as designated contract markets.
The newly issued advisory provides these platforms with procedural guidance for obtaining regulatory approval for trading instruments. It emphasizes that companies should exclusively offer contracts “not readily susceptible to manipulation.”
Regarding sports-focused contracts, the guidance directs platforms to establish communication channels with appropriate sports organizations when creating contract specifications, compliance frameworks, and market monitoring protocols.
States and the CFTC Are Clashing Over Jurisdiction
This regulatory initiative unfolds amid ongoing legal conflicts between the CFTC and various state authorities. Several states have initiated lawsuits against prediction market operators, contending these platforms operate under state gambling statutes — especially concerning sports wagering.
Selig has vigorously contested these claims, maintaining that the CFTC possesses exclusive federal jurisdiction over these trading venues. He has publicly committed to legally challenging any state attempting to exercise regulatory control over prediction market operations.
Nevertheless, an Ohio court recently rejected Kalshi’s motion for preliminary injunctive relief against Ohio’s gaming regulators. The judge determined that Kalshi failed to demonstrate federal law would definitively preempt Ohio’s sports betting regulations.
CME Group CEO Terry Duffy commented Thursday that the conflicting judicial rulings might ultimately require Supreme Court intervention. “I don’t see how it doesn’t go to the Supreme Court for a definition of what is a prediction market on sports,” he stated.
Selig Is Running the CFTC Alone
Selig presently serves as the CFTC’s sole commissioner. While the commission typically consists of five members, positions have remained unfilled since former acting chair Caroline Pham departed in December.
Given that only a majority quorum is required for rule adoption, Selig possesses unilateral authority to approve the final prediction markets regulation independently. As of Thursday, President Trump had not announced any nominations for commission vacancies.
The rulemaking document spans 32 pages and presents numerous questions designed to shape the final regulatory framework. Applications for designated contract market registration have increased by more than 100% over the previous year, predominantly from organizations pursuing prediction market operations.
