CFTC Chairman Joins Battle Over Prediction Markets, Promising To Protect Companies That Employ Donald Trump Jr. From State-Level Legal Challenges

The chairman of the Commodity Futures Trading Commission, Mike Selig, says his agency will be siding with prediction markets in state-led lawsuits, citing the importance of the markets and the supremacy of the federal government in regulating them. These markets have faced significant legal challenges in recent years as public officials warn of risks associated with gambling. Two of the largest prediction markets, Polymarket and Kalshi, have found friends in the administration over the course of the last year after bringing the president’s own son, Donald Trump Jr., on as an advisor, despite being competitors. Mr. Trump’s spokesman told the New York Times that he does not interact with the federal government about regulations for these markets, however. Mr. Selig was nominated to be chairman of the CFTC by President Trump last year. In his testimony before the Senate Agriculture Committee last year, he told lawmakers that he would “look to the courts” and respect those rulings with respect to prediction market lawsuits. Now, he says his agency will proactively be defending these markets from state lawsuits. “Over the past year, American prediction markets have been hit with an onslaught of state-led litigation,” Mr. Selig said in a video message posted to X. “Prediction markets aren’t new. The CFTC has regulated these markets for over two decades. They provide useful functions for society.” He argues that the marks provide a “check” on the press and information streams. “Today, 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,” Mr. Selig said in his video. Additionally, he says that the CFTC would be filing an amicus brief on Tuesday siding with Crypto.com in its lawsuit against Nevada gaming regulators, though that brief has not yet been made public through court documents. The CFTC did not immediately respond to a request for comment. In that case, North American Derivatives Exchange, Inc. v. Nevada, a federal judge declined to grant a request to block the state from barring the prediction market from offering event contracts related to sports. Event contracts are binary betting tools which allow users to bet on whether or not a certain event will take place. In an opinion piece for the Wall Street Journal on Monday, Mr. Selig wrote that state regulators are trying to “encroach” on the federal government’s ability to regulate prediction markets. “Well-known CFTC-registered exchanges used by tens of millions of Americans … face an onslaught of state-driven litigation across the country, with nearly 50 active cases presenting a range of legal challenges,” Mr. Selig wrote. “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.”These exchanges aren’t the Wild West, as some critics claim, but self-regulatory organizations that are examined and supervised by experienced CFTC staff.Last week, 22 Senate Democrats wrote to Mr. Selig to ensure that the CFTC would enforce the law with respect to certain event contracts and abstain from intervening in pending litigation. “[S]hould the Commission initiate a rulemaking on event contracts, as you suggested, we ask that those rules adhere to the statute and prior regulations, and reiterate that contracts involving gaming (including sports), war, terrorism, assassination, or other enumerated activities are barred and may not be listed, traded, or cleared under the Commodity Exchange Act,” the lawmakers wrote. “The real-world consequences are already evident,” they argue. “Prediction market platforms are offering contracts that mirror sportsbook wagers and, in some cases, contracts tied to war and armed conflict. These products evade state and tribal consumer protections, generate no public revenue, and undermine sovereign regulatory regimes.”It isn’t just Democrats who are raising alarms about these prediction markets. The former governor of New Jersey, Chris Christie, is a supporter of legalized sports betting and has worked in his post-gubernatorial years as a paid lobbyist for the industry. He says, however, that platforms like Polymarket and Kalshi are illegally entering the sports betting market while seeking to stifle states’ ability to regulate them. “Violating the rights of states who have been regulating sports betting and the rights of the states who oppose sports betting is not the purview of another alphabet soup federal agency. That’s what you’re doing,” Mr. Christie wrote on X Tuesday in response to the CFTC chairman. Another Republican, Governor Spencer Cox of Utah, says the CFTC does not have the ability to trample on states’ ability to regulate what he sarcastically calls the derivative market of “LeBron James rebounds.” “[Prediction markets] are destroying the lives of families and countless Americans, especially young men. They have no place in Utah,” Mr. Cox wrote on X. “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.”Not only are there concerns about the legality of these prediction markets and states’ ability to regulate them, but there are additional worries about the impact that this kind of gambling will have on society, especially among America’s younger generations. According to the American Association for Boys and Men, states which have legalized sports betting have seen an increase in bankruptcies, a restriction of credit, and a notable decrease in credit scores. “The bottom line: Sports betting is leading to financial harm, and initial evidence suggests the effects are strongest among young men living in poorer areas,” a Harvard University postdoctoral fellow, Poet Larsen, wrote for the outlet last year.

CFTC Chairman Joins Battle Over Prediction Markets, Promising To Protect Companies That Employ Donald Trump Jr. From State-Level Legal Challenges

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