The Commodity Futures Trading Commission, the main U.S. federal regulator for derivatives and financial futures, has taken major steps toward establishing a nationwide framework for online prediction markets. This week, CFTC Chair Mike Selig introduced operational guidelines and started a formal rulemaking process that could significantly affect how these markets function across the country.
CFTC Issues New Guidance And Opens Rulemaking
Selig presented the initiatives on Thursday, describing prediction markets as innovative additions to the financial sector. The agency issued a staff advisory, clarifying that event contracts—tradable instruments based on the outcome of various real-world events—are now categorized as a unique class of financial product. The CFTC also officially began the process for public comment on new rules by filing an Advanced Notice of Proposed Rulemaking in the Federal Register, opening a 45-day window for responses.
According to the commission’s guidance, platform operators such as Kalshi, Polymarket, and Coinbase have been given preliminary frameworks for navigating US regulation. The advisory underscores that listed contracts must be designed to minimize manipulation risks. Platforms are specifically directed to work with official sports organizations when offering contracts based on sporting events to ensure compliance and effective oversight.
Jurisdictional Conflict With State Regulators
Legal tension has emerged as several state agencies challenge the CFTC’s authority over prediction markets, especially regarding sports-based contracts that may fall under state gaming laws. Ohio authorities, in particular, have moved against Kalshi, a digital prediction market operator. Kalshi, founded in 2018, offers markets for users to trade contracts on the likelihood of future events such as political outcomes and economic data releases. The company has sought to build compliant infrastructure to operate openly in the US market.
Selig has consistently maintained that federal oversight for these venues lies solely with the CFTC, and he signaled intent to counter state-level interventions through legal channels. However, a district court judge in Ohio recently denied Kalshi’s request to block state gaming regulators, finding that Kalshi did not establish that federal regulation regarding sports contracts supersedes state law.
The clash over regulatory boundaries has drawn wider attention. CME Group CEO Terry Duffy remarked that contradictory court rulings on the powers of state and federal authorities could eventually prompt a Supreme Court review.
“I don’t see how it doesn’t go to the Supreme Court for a definition of what is a prediction market on sports,” Duffy stated, reflecting ongoing industry uncertainty.
Leadership Vacuum And Unilateral CFTC Action
Mike Selig currently governs the CFTC alone, following the resignation of previous members—an unusual situation for the agency, which customarily has a five-member commission. The absence of additional commissioners grants Selig full authority to determine and finalize the agency’s actions regarding prediction markets, as only a majority is needed to approve new regulations and Selig is the only sitting member. As of Thursday, no replacement commissioners had been nominated by President Trump.
With applications for official contract market registration more than doubling since last year, the regulatory shift signals that platforms specializing in event trading are seeking clearer national rules before expanding further. The CFTC’s 32-page proposal includes multiple detailed questions for public evaluation, suggesting further changes may follow based on industry and public feedback during the comment period.
