US states cannot regulate prediction markets, CFTC claims
The Commodity Futures Trading Commission (CFTC) has said it will fight efforts by individual US states to regulate prediction markets, arguing that such platforms fall under federal derivatives law rather than state gambling statutes.
In an opinion article published in The Wall Street Journal, CFTC chairman Mike Selig wrote that the commission holds exclusive jurisdiction over prediction markets under the 1936 Commodity Exchange Act. He said the agency would back an appeal by Crypto.com aimed at overturning state restrictions imposed on certain contracts.
Prediction markets allow people to buy and sell contracts based on the outcome of future events, like elections, economic data, or sports. Traders bet on whether certain outcomes will happen, and contract prices change as opinions shift. Supporters say these contracts work much like futures and other financial products already regulated by the federal government.
States challenge the regulation
Several states disagree with this view. Some state regulators have issued cease-and-desist orders, saying contracts tied to sports or public events are like betting and should be covered by state gambling laws. This has led to a dispute over who has the right to regulate these markets.
Selig described what he called an “onslaught of state-driven litigation”, saying the commission would not allow states to establish broad prohibitions on products he characterised as legitimate financial instruments. He rejected suggestions that prediction exchanges operate without oversight, writing that registered platforms function as self-regulatory organisations subject to examination and supervision by CFTC staff.
AGA and iGaming firms fight back
Criticism has also come from established gambling industry groups. The American Gaming Association, which represents casinos and sportsbooks, has argued that prediction markets risk undermining state-regulated sports betting frameworks. The AGA has described partnerships between major sports leagues and prediction platforms as “deeply concerning”, warning that they may operate outside the safeguards and consumer protections required of licensed sportsbooks and could weaken the integrity of sports wagering.
Independent commentators have echoed similar concerns. Some experts even suggest that operating a prediction markets represent a way for companies to provide similar services without facing the same regulatory hurdles.
These objections come as several state attorneys general and regulators have pursued legal action against prediction platforms, arguing they constitute gambling that should be controlled under local law. Legal experts say the dispute over classification — between federally regulated derivatives and state-regulated gaming — is likely to be resolved in the courts, with potential implications for how these markets operate in the United States.
State leaders up in arms
State officials have also voiced opposition. Spencer Cox, the Republican governor of Utah, rejected the suggestion that sports-related contracts qualify as derivatives. In a social media post, he described such markets as gambling and said he would use the powers of his office to defend state authority in court.
The debate has also attracted political attention. Donald Trump Jr. has links to prediction platforms Polymarket and Kalshi, serving as an investor and adviser. The Trump family’s media company has announced plans to launch its own prediction service, adding further scrutiny to the regulatory fight.
The courts will likely decide this dispute. The result could determine if prediction markets are mainly seen as derivatives regulated by the federal government or as betting controlled by states, which will affect how these platforms run across the US.
Be part of the action! Join the world’s biggest iGaming community with SiGMA’s Top 10 News countdown. Subscribe HERE for weekly updates, insider insights, and exclusive subscriber-only offers.
