A significant regulatory battle is unfolding between the U.S. Commodity Futures Trading Commission (CFTC) and multiple states over the classification and oversight of prediction markets, with platforms like Kalshi, Polymarket, and Crypto.com caught in the crossfire. CFTC Chairman Mike Selig has taken a firm stance, declaring the agency's readiness to litigate to maintain federal preemption and protect these emerging markets, which he argues fall under the CFTC's exclusive jurisdiction over derivative contracts.
The conflict escalated with a recent court filing where the CFTC submitted an amicus brief in support of Crypto.com's lawsuit against the Nevada Gaming Control Board. The board had ordered Crypto.com to pull its prediction market product from the state, leading to a lawsuit. While a federal judge denied Crypto.com's request for a preliminary injunction, the company has stopped offering sports event contracts in Nevada pending an appeal.
State opposition is bipartisan and vocal. Utah Governor Spencer Cox (R) publicly challenged Selig on social media, stating, "These prediction markets you are breathlessly defending are gambling—pure and simple. They are destroying the lives of families and countless Americans, especially young men. They have no place in Utah." He vowed to use every resource to fight the CFTC in court. Other states involved in lawsuits or challenges include Nevada, New York, Massachusetts, Hawaii, and Maryland.
The debate centers on whether prediction market contracts—including those for sports outcomes like "LeBron James rebounds"—are financial derivatives or gambling. Prediction market platforms argue they are derivatives under CFTC purview, while state officials contend they are equivalent to traditional sports betting, long regulated by state gaming authorities.
Political pressure is mounting from both sides. A group of 23 Democratic Senators recently sent a letter to Selig urging him to "abstain from intervening in pending litigation involving contracts tied to sports, war, or other prohibited events." Conversely, CFTC Chairman Selig, a crypto-industry ally nominated by former President Donald Trump, asserted in a Wall Street Journal essay that the agency would "no longer sit idly by while overzealous state governments undermine the agency’s exclusive jurisdiction."
The outcome has broader implications for crypto integration, as major exchanges like Coinbase and Robinhood offer prediction market products in partnership with Kalshi. Furthermore, Trump Media has partnered with Crypto.com to build its own forthcoming platform, Truth Predict. Crypto executives, including Gemini co-founder Tyler Winklevoss, have praised the CFTC's stance as leadership that could make America "the crypto and markets capital of the world."
