Senators Urge CFTC to Rein In Prediction Markets Tied to Problematic Topics

A growing group of US lawmakers who support more rigorous controls on prediction market platforms believes that certain contracts create significant dangers to public safety and public health. On February 23, a group of Senate Democrats sent a formal letter to Michael Selig, chairman of the Commodity Futures Trading Commission (CFTC), demanding clearer boundaries on what these markets can offer.

Certain Types of Contracts Are Strictly Prohibited

The letter was spearheaded by Sens. Richard Blumenthal (Conn.), Cory Booker (N.J.), Catherine Cortez Masto (Nev.), Tim Kaine (Va.), Jacky Rosen (Nev.), and Adam Schiff (Calif.), among others. Lawmakers drew attention to contracts on platforms such as Polymarket that they believe cross a line by linking financial rewards to outcomes associated with physical harm, destabilizing geopolitical events, or even loss of life.

Senators argue that some contracts might incentivize dangerous behavior. Some examples of national security and ethical risks included contracts linked to the explosion of a space mission or the ousting of Venezuelan President Nicolás Maduro. Lawmakers argue that such offerings could create incentives to incite violence and disclose classified information.

Recent events highlight the lack of internal controls and safeguards to prevent insiders from profiting off of non-public information, and direct profiteering off of human suffering.

Senate Democrats’ letter to Michael Selig

The Commodity Exchange Act (CEA) prohibits certain event contracts if they are contrary to the public interest, including those referencing terrorism, assassination, and war. According to the letter, some platforms offer contracts tied to such outcomes despite such restrictions. Senators are urging the CFTC to bolster its enforcement efforts and remove any ambiguity regarding restricted offerings.

Prediction Markets Remain Shrouded in Ambiguity

This skepticism coincides with rising tensions between the CFTC and state efforts to control prediction markets. The commission has become increasingly favorable toward the sector, emphasizing its exclusive jurisdiction over event contracts. However, some states have taken measures against prediction operators, treating their sports-related contracts as unlicensed gambling.

Critics in Congress argue that the prediction market industry is expanding too quickly while still shrouded in legal ambiguity. They claim the sector requires strict controls because it is prone to manipulation and exploitation. Without firm rules, prediction markets could undermine state and tribal gambling oversight or avoid critical consumer protections.

The letter and spirit of the CEA’s prohibition on war, terrorism, and assassination contracts is clear. We expect the CFTC to enforce the law.

Senate Democrats’ letter to Michael Selig

Senators gave Selig until March 9 to answer their questions and outline how the CFTC plans to enforce prohibitions on problematic contracts that involve or

relate to war, terrorism, or assassination. Lawmakers stated that they expect the CFTC to enforce existing laws and have even offered to assist the agency with the resources it needs to ensure proper control.