CFTC claims sole authority to regulate prediction markets

In a court filing and a short video posted on social media on Tuesday, Commodity Futures Trading Commission Chair Mike Selig waded into the raging battle over prediction markets’ ability to offer sports betting across the US.

Prediction markets have been “hit with an onslaught of state-led litigation,” Selig said in the video shared on X. As such, he continued, the regulator has submitted a so-called amicus brief in a lawsuit filed last year by crypto exchange Crypto.com.

When the Nevada Gaming Control Board ordered Crypto.com to pull its prediction market product from the state, the company sued. But a federal judge denied its request for a preliminary injunction. Crypto.com has stopped offering sports event contracts in Nevada while it appeals the judge’s order.

A copy of the CFTC’s brief wasn’t immediately available online. But Selig said the agency had filed the brief in order to “defend its exclusive jurisdiction over these derivative markets.”

The filing comes just four days after a group of 23 Senators, all Democrats, asked Selig to “abstain from intervening in pending litigation involving contracts tied to sports, war, or other prohibited events.”

“Prediction market platforms are offering contracts that mirror sportsbook wagers and, in some cases, contracts tied to war and armed conflict,” they wrote in a February 13 letter.

“These products evade state and tribal consumer protections, generate no public revenue, and undermine sovereign regulatory regimes.”

LeBron James rebounds

Their concern isn’t stricly partisan.

“Mike, I appreciate you attempting this with a straight face, but I don’t remember the CFTC having authority over the ‘derivative market’ of LeBron James rebounds,” Utah Governor Spencer Cox, a Republican, said on X.

“These prediction markets you are breathlessly defending are gambling — pure and simple. They are destroying the lives of families and countless Americans, especially young men. They have no place in Utah.”

While prediction markets such as Kalshi and Polymarket began by offering bets on economic indicators and world events, they eventually branched into sports betting. But they’ve found themselves in a multi-front legal battle against states that require sports gambling platforms to seek licensure.

The companies have argued that the CFTC has the sole authority to regulate financial derivatives, a category that, they say, includes sports-themed “event contracts.” But states officials have argued those products are no different from traditional sports gambling, which has long been regulated by state gaming authorities.

Selig, a crypto-industry ally nominated last year by President Donald Trump to lead the CFTC, dodged questions about his position on the matter during his confirmation hearing in November.

Selig repeatedly referenced prediction markets’ ongoing legal battles and said he would defer to the courts.

Turf wars

Selig hasn’t exactly broken that promise — an amicus brief is just an opinion offered for a court’s consideration.

Nevertheless, its opinion carries great weight, according to Andrew Verstein, the co-director of the business law program at the University of California, Los Angeles.

“In general, the CFTC has a very powerful position, which is that it has a terrifically wide congressional authorization to be the sole regulator of products that it wants to regulate,” he told DL News.

“And this has led to a lot of turf wars in the past, boundaries between states and the CFTC on gambling laws, boundary disputes with the SEC about different derivatives, what’s in, what’s out.”

Selig echoed that sentiment in an X thread accompanying his video.

“Congress gave the CFTC comprehensive authority over any contract based on a commodity, and the legal definition of a commodity is very broad,” he wrote.

And in a Wall Street Journal essay published Tuesday, he said the agency would “no longer sit idly by while overzealous state governments undermine the agency’s exclusive jurisdiction over these markets by seeking to establish statewide prohibitions on these exciting products.”

Crypto executives hailed the news.

“This is the kind of leadership and courage that will make America the crypto and markets capital of the world,” Tyler Winklevoss, co-founder of crypto exchange Gemini, wrote.

Robinhood and Coinbase both offer a prediction market product in partnership with Kalshi. Trump Media, the conglomerate majority-owned by Trump, partnered with Crypto.com to build its own forthcoming prediction market platform, Truth Predict.

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