US Senators urge CFTC to Avoid Intervening in Legal Disputes Over Prediction Markets
The Surge and Debate Surrounding Prediction Markets
Prediction markets, digital platforms were participants purchase contracts based on the outcomes of real-world events, have experienced a remarkable rise in popularity. Today, users place wagers on diverse subjects ranging from geopolitical developments to award ceremonies and major sporting spectacles like the FIFA World Cup. This rapid expansion has thrust these markets into public scrutiny, igniting discussions about their ethical considerations and legal frameworks.
Complex Legal Issues Facing Prediction Market Platforms
A recent incident that highlights regulatory challenges involved the detention of two individuals by Israeli authorities for allegedly using classified military data to bet on Polymarket, one of the world’s leading prediction market operators. Such cases emphasize the intricate legal hurdles confronting this fast-evolving sector.
Federal Oversight Versus State gambling regulations
The regulatory surroundings for prediction markets remains highly contested. The US government currently categorizes these platforms as derivatives under the commodity Futures Trading Commission’s (CFTC) jurisdiction. Conversely, multiple state regulators contend that prediction markets should be governed under gambling laws applicable within their territories.
This tension is reflected in ongoing litigation: at least 19 federal lawsuits challenge Kalshi’s operations across various states. As an example, a Massachusetts court recently barred Kalshi from offering sports-related contracts after state officials accused it of operating without a valid gambling license. In retaliation, Polymarket initiated a countersuit disputing Massachusetts’ authority over its business activities.
CFTC’s Stance and Industry Reactions
As assuming office in December 2025, CFTC Chairman Michael Selig has indicated potential agency involvement in resolving jurisdictional conflicts but firmly defended CFTC’s exclusive role regulating derivatives markets. He acknowledged that courts might better interpret certain product classifications but maintained that primary oversight rests with the commission.
Selig also dismissed comparisons between prediction markets and conventional sports betting during recent remarks: “These are not bets against a house,” he explained on Bloomberg’s Odd Lots podcast. He emphasized existing regulations sufficiently cover these platforms without imposing different standards based on event types such as elections or athletic contests.
Divergent Political Opinions Among Legislators
A group of 23 Democratic senators led by California’s Adam Schiff sent an open letter urging Chairman Selig not to interfere with ongoing state lawsuits targeting companies like Polymarket and Kalshi. They advocated banning contracts related to sensitive topics including war, terrorism, assassination attempts, or other specified activities due to concerns over consumer protection gaps and absence of public revenue benefits.
- Main supporters: Senators Cory Booker, Amy Klobuchar, Ron Wyden among others backed this position emphasizing states’ sovereign rights over regulation within their borders.
- CFTC response: Taylor Foy from CFTC described this letter as misrepresenting Chairman Selig’s views while reaffirming his commitment toward exclusive federal regulation yet recognizing some issues may require judicial clarification.
Evolving Regulatory Approaches Across Administrations
- Biden Governance (2024): The CFTC proposed restrictions prohibiting certain contract types involving political events and sports aiming for tighter controls over potentially problematic offerings amid growing concerns about market integrity.
- Trump-era policies: After Michael Selig took office late last year during President Trump’s administration influence persisted; previously suggested bans were quickly withdrawn alongside establishing an advisory board composed of executives from major prediction market firms-signaling openness toward industry expansion rather than restriction.
Tensions between Regulators and Public Figures Highlight Industry Challenges
This week former New Jersey Governor Chris Christie publicly questioned via social media whether some practices within prediction markets violate existing laws; Chairman Selig promptly responded with firm disagreement stating simply: “Strong disagree.” This exchange underscores continuing friction between regulatory interpretations versus political skepticism regarding these platforms’ legitimacy.
The Road Ahead: Growth Amid Regulatory Ambiguity
- Mainstream online sportsbooks such as FanDuel have introduced predictive contract features integrated directly into popular global sporting events;
- The social media platform Gettr-majority owned by associates linked to former President Donald Trump-is developing its own product called Gettr Predict promising coverage across all major professional leagues;
- This surge reflects broader acceptance yet intensifies demands for clear regulations balancing innovation with consumer protections nationwide;
“These products bypass manny state-level consumer safeguards,” senators cautioned in their letter urging vigilance against unchecked growth lacking proper accountability mechanisms.”
Diverse Stakeholder Views Shape Ongoing Regulatory Dialog
Lobbyists representing industry interests argue only federal bodies like the CFTC possess adequate expertise necessary for overseeing complex derivatives-based marketplaces effectively-asserting states lack capacity required for extensive supervision compared with specialized national agencies managing financial instruments globally today.
Former US representative Sean Patrick Maloney stated emphatically: “No state gaming commission will ever have competence overseeing derivatives generally.”
