Key Takeaways

  • CFTC released staff guidance and initiated formal rulemaking procedures for prediction market regulation on Thursday
  • Chair Mike Selig asserts the agency holds exclusive federal authority over prediction market oversight
  • Companies including Kalshi, Polymarket, and Coinbase receive preliminary operational guidance for United States markets
  • A federal claim faces complications following an Ohio court decision denying Kalshi’s motion against state gaming regulators
  • Public feedback will be accepted for 45 days following Federal Register publication

The U.S. Commodity Futures Trading Commission has advanced prediction market regulation through two significant actions: releasing operational guidance and launching a formal rulemaking initiative poised to transform the sector.

CFTC Chair Mike Selig revealed these developments on Thursday, characterizing prediction markets as “one of the most exciting innovations in financial markets” while acknowledging the agency’s prolonged delay in establishing clear regulatory parameters.

The Commission published a staff advisory designating event contracts on prediction markets as a distinct financial asset category. Additionally, the agency filed an Advanced Notice of Proposed Rulemaking with the Federal Register, initiating a 45-day period for public input.

Prediction markets function as platforms enabling participants to trade contracts based on binary event outcomes — ranging from election results to sporting competitions. Operators such as Kalshi, Polymarket, and Coinbase operate under CFTC oversight as designated contract markets.

The advisory provides these organizations with protocols for securing regulatory approval for trading instruments. The guidance emphasizes that platforms should exclusively offer contracts “not readily susceptible to manipulation.”

Regarding sports-based contracts, the advisory directs companies to coordinate with appropriate sports governing organizations when formulating contract terms, compliance frameworks, and market surveillance protocols.

Federal and State Authorities Battle Over Regulatory Control

The rulemaking initiative arrives amid ongoing litigation between the CFTC and various state regulatory bodies. Several states have filed lawsuits against prediction market operators, claiming these platforms operate within state gambling jurisdiction — especially concerning sports wagering.

Selig has mounted a vigorous defense, maintaining that the CFTC possesses exclusive federal oversight authority for these markets. He has pledged to legally contest any state attempting to exercise regulatory power over prediction market platforms.

Meanwhile, an Ohio court rejected Kalshi’s motion for preliminary relief against Ohio gaming regulators. The judge determined that Kalshi failed to demonstrate federal law would definitively supersede Ohio’s sports betting statutes.

CME Group CEO Terry Duffy stated Thursday that 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 said.

Single Commissioner Controls CFTC Decision-Making

Selig currently serves as the CFTC’s sole commissioner. The agency typically operates with five members, though positions have remained unfilled since 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. Through Thursday, President Trump had made no announcements regarding new agency appointments.

The rulemaking document spans 32 pages and presents numerous questions designed to shape the final regulatory proposal. Applications for designated contract market registration have increased more than twofold during the past year, primarily from organizations concentrating on prediction markets.