In a significant policy announcement on Thursday, Michael S. Selig, Chair of the Commodity Futures Trading Commission (CFTC), highlighted the commission's intention to formulate clear and definitive rules for prediction markets. This move marks a departure from earlier proposals and advisories that had sparked uncertainty within the sector.
Chair Selig explicitly instructed CFTC staff to retract the 2024 rule proposal which had sought to prohibit event contracts related to political and sports outcomes. He similarly directed the discontinuation of a 2025 advisory cautioning prediction markets against offering sports-related contracts due to legal ambiguity. In his remarks, Selig emphasized the necessity of a transparent approach, stating, "It is time for clear rules and a clear understanding that the CFTC supports lawful innovation in these [prediction] markets."
The CFTC is currently drafting specific standards to govern event contracts. Selig noted deficiencies in the current regulatory framework, observing that it has historically been challenging to apply and has under-served market participants. "For too long, the CFTC's existing framework has proven difficult to apply and has failed our market participants," he remarked.
Beyond internal rulemaking, Selig has tasked his staff with reassessing the CFTC's role in ongoing legal matters heard in federal district and circuit courts, particularly where jurisdictional questions are contested. He reaffirmed the CFTC’s responsibility and expertise in defending its exclusive authority over commodity derivatives, signaling a readiness to robustly assert the commission’s regulatory mandate.
The push for defined regulatory parameters arrives amid growing scrutiny by state gaming regulators over prediction markets. Several states have confronted the sector’s growth, creating friction over who holds primary regulatory authority.
Notably, Coinbase, a major cryptocurrency exchange planning to enter prediction markets through a partnership with Kalshi—a platform regulated by the CFTC—has initiated lawsuits against the states of Michigan, Illinois, and Connecticut. These legal actions aim to affirm federal primacy in regulating prediction markets, contesting individual state gaming authorities. Coinbase warned that state-level interventions could cause "immediate and irreparable" disruptions to its planned operations in this emerging market segment.
Concerns around the expansion of sports-related prediction platforms have also been voiced by influential figures such as former New Jersey Governor Chris Christie. Now a strategic advisor to the American Gaming Association, Christie has highlighted the potential legal, economic, ethical, and regulatory risks posed by these markets. He has cautioned that they may undermine existing state laws and jeopardize the integrity of both professional and amateur sports.
Market reactions to the CFTC’s policy shift have been mixed among companies exposed to prediction market operations. Genius Sports, a provider of data services to sports leagues and betting entities, saw its shares decline slightly despite the announcement. Publicly traded companies involved in sports betting, such as DraftKings and Flutter Entertainment, exhibited varied stock performance with modest changes. Similarly, Coinbase and Robinhood—both with ambitions in offering betting contracts—traded lower by the close of regular trading hours Thursday.
The evolving regulatory landscape reflects complex tensions between federal regulatory clarity and state efforts to impose gaming controls. As the CFTC moves toward establishing explicit rules supporting lawful innovation within prediction markets, the outcomes of concurrent legal disputes and policy debates will be critical in shaping the sector’s future framework.