In a consequential interview with leading news outlet Axios, the chairman of the Commodity Futures Trading Commission (CFTC) has sought to draw a line between prediction market platforms and sports betting operators.
He said: “They’re different models. The conventional sportsbooks and casinos are entertainment and they have a lot of authority to be able to kick people out when they keep winning. When you go to the derivatives markets, that’s not allowed. You keep winning? Great. You take your earnings.”
The remarks are likely to further inflame the tensions between the CFTC and state-funded gambling commissions throughout the country.
Markets vs entertainment, says Selig
A former crypto regulatory lawyer and adviser on digital assets, Selig has become a key figure in the debate over whether platforms like Kalshi and Polymarket should be treated as financial exchanges or gambling operations.
His influence to classify prediction markets as federally regulated financial products, rather than state-regulated betting platforms, is seen as key to the future of sports, political and event-based trading in the U.S.
He added: “What you’re seeing is markets versus entertainment. For those that want the discipline and integrity of a market, it’s a better model. For those that want entertainment, the casinos might be the model for them.”
In response the American Gaming Association (AGA), the premier Washington, D.C.-based national trade group representing the $260+ billion U.S. casino industry, argues prediction markets are essentially just gambling without the regulations.
On their own web page, in which they have a running clock counting the tax dollars lost to prediction markets, the AGA states: “Prediction market platforms are offering sports betting nationwide outside the state and tribal regulatory frameworks that protect consumers. They override voter decisions, bypass key consumer protections, ignore state and tribal laws, and avoid licensing and taxes.”
Insider trading in CFTC crosshairs
Concerns over insider trading in prediction markets have drawn growing attention in Washington as prediction market platforms expand into politics, sports and real-world events tied to sensitive information.
Lawmakers and regulators are increasingly questioning whether traders with access to nonpublic government, corporate or sports-related information could exploit those markets for profit, raising issues similar to insider trading in traditional financial markets.
Addressing the issue, Selig explained how laws governing insider trading in derivatives markets are “nearly identical” to the SEC’s rules prohibiting insider trading in securities.
He said: “An insider is defined as someone who misappropriates nonpublic information where they have a duty of confidence, whether it’s their employer, their patient, their client or anybody else where there’s a duty,
“We’ll continue to be an aggressive policeman when it comes to insider trading on our markets, as will the DOJ.”
Lawmakers in Washington has already moved to tighten restrictions through a series of bipartisan proposals aimed at prediction markets and stock trading. One recent Senate measure unanimously barred senators and staff from trading on prediction markets, while broader legislation would prohibit government employees and campaign staffers from using nonpublic information to place bets or make trades tied to political or market-moving events.
Senator Bernie Moreno, from Ohio, who sponsored the resolution said: “United States senators have no business engaging in speculative activities like prediction markets while collecting a taxpayer-funded paycheck, period.”
Sports bettors down big on Kalshi, data shows
Meanwhile, a Sportico analysis of sports trading on Kalshi shows a concerning trend, with more than $100 million lost in parlay bets placed on retail or app sites this year alone.
According to data stored for public access by the prediction market company’s partner Dune, approximately $117 million was lost by punters, with over a third of that figure going to the platform in fees.
The proceeds were split between Kalshi and third-party oddsmakers, including some working on behalf of institutional firms such as Susquehanna International Group. Retail users, identified in the data as “takers,” can only accept pre-set parlay lines on Kalshi’s app.
Parlays, long a profit driver for sportsbooks, have grown rapidly on federally regulated prediction markets. Kalshi introduced parlays in September, when they made up less than 3% of exchange betting volume. By April, parlays accounted for about 22% of total volume. Traditional sportsbooks often post even higher parlay hold rates, regularly above 18% and sometimes topping 20%, according to betting analyst Alfonso Straffon.
