The Commodity Futures Trading Commission (CFTC) is signaling its intent to assert authority over the exploding prediction market sector.
Chairman Michael Selig, a Donald Trump appointee, has accused state governments of attempting to undermine their jurisdiction over the industry, which has mushroomed into a multi-billion dollar business.
Amicus brief filed in federal court on Tuesday
Selig confirmed the federal government had submitted an amicus brief in federal court on Tuesday arguing that it, rather than individual states, has the authority to regulate and oversee prediction markets.
An amicus brief, short for amicus curiae or “friend of the court,” is a legal filing submitted by a person or organization that is not directly involved in a case but has a strong interest in its outcome. Rather than representing one of the parties, the filer seeks to provide additional context, expertise or legal arguments to assist the court in making its decision.
Writing in a Wall Street op-ed on Monday, Selig said: “The CFTC will 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,”
In a video later posted to X, he added: “The CFTC is taking an important step to ensure that these markets have a place here in America and have the integrity and resilience and vibrancy that our derivatives markets deserve.”
Selig receives quick riposte from state representatives
The news has already been met by blunt bipartisan criticism from elected state officials. Spencer Cox, the Republican governor of Utah, posted on X in response to the CFTC’s actions: ““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,
“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.
“Let me be clear, I will use every resource within my disposal as governor of the sovereign state of Utah, and under the Constitution of the United States to beat you in court,”
U.S. senator Elizabeth Warren added on her X account: “Trump’s CFTC is trying to strip states’ authority to regulate gambling within their borders and protect Americans from getting ripped off.
“The CFTC should focus on ensuring our derivatives markets don’t blow up the economy again, not helping corrupt political insiders cash in.”
CFTC announces new committee to navigate prediction markets
Last week, the CFTC announced the members of its newly formed Innovation Advisory Committee (IAC), a panel designed to help the agency navigate rapid technological change across derivatives and commodity markets.
Selig said the committee would help ensure the regulator’s decisions reflect market realities and establish “clear rules of the road” as financial markets evolve. He has appointed Michael Passalacqua as the committee’s designated federal officer.
The panel brings together senior executives from across traditional finance, crypto and prediction markets, including leaders from Coinbase, Uniswap Labs, CME Group, Nasdaq, Kalshi, Polymarket and DraftKings, among others.
The CFTC said the committee will serve as a resource on emerging technologies such as artificial intelligence and blockchain, helping the agency develop adaptive regulations and maintain oversight as innovation reshapes U.S. financial markets.
Prediction market litigation remains ongoing in multiple states
Prediction markets are at the center of a growing legal tug-of-war between federal regulators and state authorities. Operators such as Kalshi and Polymarket contend their platforms are regulated under the federal Commodity Exchange Act as event-based financial contracts, exempting them from individual state gambling laws. That federal preemption argument has enabled these platforms to operate across all 50 states, even where traditional sports betting remains illegal.
State gaming regulators and attorneys general challenge that position, arguing many prediction markets function like unlicensed gambling operations and should be subject to state licensing, consumer protections and taxation. Several states including Nevada, Arizona, Illinois, Maryland and Massachusetts have issued cease-and-desist orders or sued operators, claiming offerings such as sports event contracts violate local gambling statutes.
Court rulings so far have been mixed. In some cases, federal judges have agreed with states that certain event contracts resemble gambling and therefore fall outside the exclusive jurisdiction of the CFTC, while other courts have blocked state enforcement. This patchwork legal landscape has spurred ongoing litigation and could ultimately require a definitive ruling from the U.S. Supreme Court or new congressional legislation.
Beyond jurisdiction, states and critics continue to have concerns about consumer protection, market integrity and risks such as insider trading, citing a lack of safeguards and oversight found in regulated sportsbooks. Supporters of federal oversight counter that uniform national regulation is preferable to a fragmented state-by-state approach, but the clash highlights deep divisions over how to classify and govern these emerging platforms.
