Prediction markets, crypto get bipartisan scrutiny at congressional hearing

Recent controversies seem to be testing congressional Republicans’ steadfast support for crypto and prediction markets.

Republican lawmakers on Thursday asked Michael Selig, the head of the Commodity Futures Trading Commission, for assistance crafting legislation to onshore certain crypto platforms and to combat insider trading on prediction markets.

Ever since President Donald Trump took office in January 2025, Democrats have used congressional hearings to attack the administration’s laissez-faire regulation of novel financial products. Their Republican colleagues have rarely joined in.

Thursday was different. Representative Austin Scott, a Republican from Georgia, said he was concerned by the rapid growth of Hyperliquid’s oil markets.

“These products are functionally identical to what is traded on Chicago Mercantile Exchange and the Intercontinental exchange, but they do not have segregated funds, market surveillance, or US oversight,” he said.

“Surging volumes in oil contracts are potentially impacting the price of a gallon of gas for US drivers.”

Addressing the issue would require bringing those markets to the US, Selig said, prompting Scott to ask for “specific recommendations” to “make sure that those markets have to meet the same standard.”

During another exchange, Representative Don Bacon, a Republican from Nebraska, said he was concerned by the appearance of insider trading on prediction markets.

“I've seen some of the uncomfortable stories related to prediction markets in recent months, including the markets on [Nicholas] Maduro’s ouster and the war in Iran,” he said.

“Markets settled just by words spoken on earnings calls, and a story about a journalist being threatened over his reporting. My question is, do you need more authorities?”

Democrats’ attacks

To be sure, Democrats were more aggressive in their questioning on Thursday, using Selig’s appearance as an opportunity to hammer oft-repeated talking points about the dangers of unregulated prediction markets, understaffing at the CFTC, and presidential corruption.

One Democrat noted that Robinhood will not list so-called mention contracts, which let users bet on whether someone says a particular word or phrase during a public appearance.

In October, Coinbase CEO Brian Armstrong concluded an earnings call by rattling off a slew of seemingly random crypto jargon, a move that delighted bettors who had wagered he would use those very words during the call.

“if Robinhood recognizes these contracts as susceptible to manipulation in trading, why doesn't the CFTC?” North Carolina’s Alma Adams asked.

Selig countered that he plans on formalising new rules for prediction markets and has requested feedback on mention contracts and other prediction market issues.

“I don't want to prejudge any of those issues,” he said.

‘Insulting’

Angie Craig, the top Democrat on the committee, asked Selig how many prediction market contracts the CFTC has rejected — something it can do if it determines a contract is unlawful.

Selig said he couldn’t provide an exact figure.

“We regularly reject contracts,” he said. “Under the prior administration, there was a lack of clarity on a lot of these contracts, and the flood gates really opened. And I inherited a lot of these contracts when I took office just over 100 days ago.”

Representative Jim McGovern, a Democrat from Massachusetts, noted that Donald Trump Jr, the president’s eldest son, was an advisor to both Kalshi and Polymarket. McGovern asked whether that was the reason the CFTC dropped an investigation into Polymarket last year.

“We do not pick winners and losers or engage in favoritism or bring politics into any of these matters,” Selig said. “We take them very seriously. And I think it's insulting that you’re insinuating that we would play political games.”

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at [email protected].