CFTC Backs Prediction Markets as US States Fight Back

The US derivatives watchdog is stepping up to defend prediction markets as legal fights with state authorities heat up. Michael Selig, who heads the Commodity Futures Trading Commission (CFTC), said the agency filed a brief supporting Crypto.com in a case at the Ninth US Circuit Court of Appeals. This move points to a wider push to strengthen federal control over event-based trading.

Federal Agency Defends Derivatives Role of Prediction Markets

The government steps in as states file more lawsuits against platforms where users bet on real-world events. Exchanges like Coinbase, Polymarket, and Kalshi face claims that their products look like gambling and should follow local gaming rules. However, federal regulators say these bets are derivatives, which fall under national commodities laws.

Selig argued in a Wall Street Journal opinion piece about why event contracts matter in the real world. He pointed out that these markets can help businesses and people protect themselves from uncertain events, like changes in energy costs or weather risks. He believes these contracts also show what the market thinks about future events, giving insights beyond just guessing.

The chairman warned that the flood of legal cases might break up an industry that lawmakers meant to control. He pointed out that federal agencies have always been in charge of watching over derivatives to make sure there are consistent rules for protecting investors, stopping fraud, and keeping things open. The commission thinks that if each state can put in place bans, it could hurt market stability and slow down innovation.

Nearly 50 Legal Cases Threaten to Redefine US Prediction Platforms

The filing backing Crypto.com is linked to a fight with the Nevada Gaming Control Board, one of many groups trying to take charge of platforms for event contracts. The CFTC believes that the current laws for commodity derivatives already have ways to stop market tricks, insider trading, and illegal money moves, so more state rules are not needed.

Selig has also hinted that the commission might create clearer rules for prediction markets soon. He thinks new guidelines could clear up confusion while keeping federal control. At the same time, the chairman seems ready to fight hard in court to keep this power.

Almost fifty cases are said to be ongoing across the country. How these cases end could change the future of prediction markets in the US. For now, federal regulators seem set on keeping watch over the industry. They do not want it to be reshaped by a mix of different state-level choices.