TLDR
- The CFTC released operational guidance and initiated formal rulemaking procedures for prediction market regulation on Thursday
- Chair Mike Selig, currently the agency’s only commissioner, asserts the CFTC maintains exclusive federal authority over prediction markets
- Major platforms including Kalshi, Polymarket, and Coinbase receive preliminary regulatory framework for domestic operations
- A federal-state jurisdiction dispute intensifies after an Ohio court denied Kalshi’s injunction request against state gaming regulators
- A 45-day public comment period begins once the proposed rule appears in the Federal Register
The Commodity Futures Trading Commission has launched two significant regulatory initiatives targeting prediction markets, releasing operational guidance while simultaneously beginning a formal rulemaking procedure that may fundamentally alter the industry landscape.
Chair Mike Selig revealed these regulatory actions Thursday, characterizing prediction markets as “one of the most exciting innovations in financial markets” while acknowledging the agency’s prolonged failure to establish clear regulatory parameters.
The commission published a staff advisory document that formally categorizes event contracts on prediction platforms as a distinct financial asset class. Additionally, the agency filed an Advanced Notice of Proposed Rulemaking with the Federal Register, initiating a 45-day period for public feedback.
Prediction markets operate as platforms enabling participants to trade contracts based on binary event outcomes — such as election results or sporting event winners. Operators including Kalshi, Polymarket, and Coinbase currently function under CFTC oversight as designated contract markets.
The newly released guidance provides these organizations with a roadmap for obtaining regulatory approval for trading instruments. It emphasizes that platforms should exclusively list contracts “not readily susceptible to manipulation.”
Regarding sports-focused contracts, the advisory directs operators to establish communication channels with applicable sports governing organizations when formulating contract specifications, compliance frameworks, and market surveillance protocols.
Federal-State Jurisdictional Battle Escalates
This rulemaking initiative unfolds amid an ongoing legal confrontation between the CFTC and various state regulatory agencies. Several state governments have filed lawsuits against prediction market operators, contending these platforms operate under state gambling statutes — especially concerning sports wagering.
Selig has vigorously contested these claims, maintaining the CFTC possesses exclusive federal jurisdiction over prediction market operations. He has pledged to legally challenge any state attempting to exercise regulatory authority over these platforms.
Nevertheless, an Ohio judge recently rejected Kalshi’s motion for a preliminary injunction blocking Ohio gaming officials. The court determined that Kalshi failed to demonstrate that federal law would automatically preempt Ohio’s sports betting regulations.
CME Group CEO Terry Duffy suggested Thursday that the contradictory judicial rulings might ultimately reach the Supreme Court. “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.
Solo Commissioner Wields Unprecedented Authority
Selig currently serves as the CFTC’s sole commissioner. The commission typically consists of five members, but vacancies have persisted since former acting chair Caroline Pham departed in December.
Since regulations require only a majority quorum for passage, Selig possesses unilateral authority to approve the final prediction markets regulation independently. As of Thursday, President Trump had not announced any nominations to fill the vacant positions.
The rulemaking document spans 32 pages and presents numerous questions designed to shape the final regulatory proposal. Applications for designated contract market registration have surged by more than 100% over the past twelve months, predominantly from organizations specializing in prediction markets.
