Blanche Lincoln Warns States Risk CFTC Authority on Markets

Former U.S. Senator Blanche Lincoln, the former Senate Agriculture Committee chair who helped craft the Dodd-Frank Wall Street Reform and Consumer Protection Act regulating swaps, is now warning that the regulatory framework she helped design is “under threat”, this time, from states trying to block prediction markets.

“We Should Not Open Up Our Regulatory Structure to a Chaotic System”

Lincoln filed testimony with the Commodity Futures Trading Commission (CFTC) at the end of last week, weighing in on the agency’s stalled Prediction Markets Roundtable. The event, originally planned for April 30, has been postponed indefinitely.

In her statement, Lincoln leaned on her background as a lead author of Dodd-Frank and highlighted her role in drafting a “special rule” for reviewing event contracts and swaps involving sensitive subjects like terrorism, assassination, war, and gambling, language that remains in the Commodity Exchange Act today.

“As lawmakers, we realized we had to establish a robust regulatory framework that would restore confidence in derivatives markets that had been deeply diminished by the collapse of Wall Street and the Great Recession in 2008,” Lincoln wrote. 

Lincoln added that key tenets of the framework were that the same rules should apply to everyone and that only the U.S. CFCT has the authority to decide which futures contracts should be prohibited. 

She also took the opportunity to express serious concern that the system is currently under threat from recent efforts by some states to block prediction markets, which are federally regulated futures contracts used by traders to predict the outcomes of major events.

“We should not open up our regulatory structure to a chaotic system where states and other jurisdictions reject contracts at will.”, she argued.

Lincoln’s letter comes as five states, including Nevada, New Jersey, and Maryland, have issued cease-and-desist orders against Kalshi, a prediction market platform for sports and other events. Lincoln now lobbies for Kalshi through her firm, Lincoln Policy Group.

Eye-Rising Testimony 

However, her testimony also raised eyebrows. At one point, Lincoln wrote, “Under Dodd-Frank, lawmakers gave the CFTC authority to prohibit contracts, but only if it determines that the contracts have no commercial utility.” 

“A hallmark of the U.S. futures industry is that the markets determine what contracts have value and those that do not.”, she added.

The text of the law does not directly support that claim. The statute empowers the CFTC to block contracts it deems contrary to the public interest, even if they might serve some commercial use.

Critics of sports-related event contracts have previously cited Lincoln’s own 2010 remarks, when she argued such contracts “would not serve any real commercial purpose”, but “would be used solely for gambling” on the Senate floor. Lincoln, however, has since shifted her stance. In her testimony, she pointed to events like the Super Bowl as having “strong commercial value” given their important impact on advertising, the sale of apparel, and the hospitality industry as a whole.