The CFTC and States Are at Odds Over Prediction Markets

The Trump administration wants to shut out states from regulating prediction markets, and some states are already promising to fight back.

After Commodity Futures Trading Commission Chair Mike Selig announced Tuesday that the federal government will seek exclusive jurisdiction over regulation of prediction markets, Utah Gov. Spencer Cox said he will continue to fight for the ability to regulate and potentially shut out the growing industry.

“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,” Cox, a Republican, wrote on X in response to a post from Selig. “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,” Cox continued.

Sports betting on platforms, such as DraftKings, is regulated at the state level, and online live sports betting is banned in multiple states, including Utah. But prediction market companies, including Polymarket and Kalshi, where people can similarly win and lose on things like game outcomes, argue that what they offer is distinct from sports betting.

Prediction markets are regulated by the Commodity Exchange Act through the CFTC. States have sued in an attempt to block sports-related event contracts and close what they see as a loophole that enables what is effectively sports betting.

The CFTC is now saying that its authority supersedes state authorities, attempting to clear a path for these platforms to be legal in all 50 states.

“Over the past year, American prediction markets have been hit with an onslaught of state-led litigation,” Selig said in a video announcing the CFTC’s move. “To those who seek to challenge our authority in this space, let me be clear: We will see you in court.”

Salig’s announcement comes days after the CFTC announced the formation of an “Innovation Advisory Committee” made up primarily of crypto and prediction market companies, such as Polymarket, Kalshi, and Coinbase.

The CFTC’s announcement has also drawn scrutiny due to the Trump family’s connections to the prediction markets industry. Donald Trump Jr. ‘s venture capital firm invested in Polymarket and Trump Jr. is also a strategic advisor to Kalshi. Trump Media & Technology Group announced last year that it would join the prediction market industry, though “Truth Predict” has yet to be rolled out.

Democrats in Congress have also spoken out on the issue recently. Sens. Adam Schiff and Catherine Cortez Masto led roughly two dozen senators last week in urging the CFTC not to weigh in on pending litigation.

Litigation is ongoing in multiple states. A federal judge in Massachusetts ruled that sports contracts are unlicensed betting, and ordered Kalshi to suspend operations in the state. Maryland won a similar case that will be heard again by the 4th U.S. Circuit Court of Appeals court later this year. A similar case from Nevada will be heard by a 9th U.S. Circuit Court of Appeals this year.

Melinda Roth, an expert on prediction and a visiting associate professor of law at Washington and Lee University School of Law, told NOTUS in January that it is likely the Supreme Court will make the final call on whether prediction markets can be regulated by the states.

“The argument is, no, this isn’t sports betting,” Roth said. “This is a financial derivative product, and we are regulated by the CFTC, and that preempts the state regulation. And in some states, Kalshi has been successful with that argument. In other states, they have not. … I am of the belief that this will be considered by the Supreme Court.”