Prediction markets face new regulatory framework as CFTC chair invites public feedback
Michael Selig, chair of the CFTC, has released an advanced notice of proposed rulemaking alongside a staff advisory addressing event contracts utilized by prediction markets platforms.
The chair of the US Commodity Futures Trading Commission (CFTC), Michael Selig, has put forward a regulatory proposal that may result in amended or entirely new regulations governing event contracts on prediction markets platforms such as Polymarket and Kalshi.
Through a notice released on Thursday, the CFTC put forth a staff advisory that designated event contracts on prediction markets as constituting a "financial asset class." Additionally, the regulatory body submitted an Advanced Notice of Proposed Rulemaking for publication in the Federal Register, seeking public input regarding the application of the Commodity Exchange Act (CEA) to prediction markets.
"Prediction markets are one of the most exciting innovations in financial markets. Yet for too long, the CFTC has failed to provide guidance for these markets being used by millions of Americans. This ends today."
— CFTC Chair Michael Selig
Both the staff advisory and the proposed regulatory framework came after Selig openly reiterated assertions that the CFTC maintained "exclusive jurisdiction" over prediction markets, responding to numerous state-level regulatory bodies that had initiated legal proceedings against firms such as Polymarket and Kalshi on the grounds of unlicensed sports betting operations. Selig, serving as CFTC chair, stated his intention to pursue legal action against any state-level efforts challenging the agency's regulatory authority over prediction markets.
Earlier this week on Monday, a judge in Ohio challenged Selig's position when she denied Kalshi's request for a preliminary injunction against Ohio gaming authorities and the state's attorney general. In her ruling, the judge stated that the company had not successfully demonstrated that the CEA "would necessarily preempt Ohio's sports gambling laws," nor that sports event contracts fell under the "exclusive jurisdiction" of the CFTC.
Selig is sole CFTC commissioner absent any White House nominations for vacant seats
Selig indicated that he "voted in the affirmative" regarding this matter, noting that "no commissioner voted in the negative." Following the exit of acting chair Caroline Pham in December, the CFTC chair now serves as the solitary member of the agency's leadership, which typically comprises a bipartisan panel of five commissioners.
Given that only a majority of the quorum of CFTC commissioners is required for rule approval, Selig potentially holds unilateral authority to greenlight the prediction markets proposal once the mandatory public notice and comment periods have concluded. As of Thursday, no additional nominations to the agency had been announced by US President Donald Trump.
Following the proposed rule's publication in the Federal Register, the public will be granted a 45-day period to submit their comments.