Commodity Futures Trading Commission (CFTC) Chairman Michael Selig is pushing back against state-level challenges to federal authority over crypto and prediction markets. Speaking at Cantor Convergence in Miami Beach, Selig said the agency’s proposed rules are attracting interest from established exchanges and new industry entrants seeking a single regulatory framework. The CFTC proposed rules in October to establish clearer standards for digital asset transactions, and under the framework, existing derivatives exchanges could expand into spot crypto trading while avoiding separate licensing requirements across 50 states.
In a November 13 CNBC interview, Selig called criminal charges brought by states against prediction market executives “really egregious.” He argued that platforms provide legitimate products under federal regulations, while states view sports-event contracts as gambling contracts. Utah filed felony charges against Kalshi and its two cofounders in October, with possible jail time, though no one has been convicted. Selig said the dispute should not put executives at risk of jail and expressed hope that the Supreme Court will settle the regulatory question.
The CFTC has also gone on the offensive. On November 13, it sued Louisiana after a state judge ordered more than 30 companies tied to CFTC-regulated derivatives to stop operating there without notice or a hearing. Louisiana is the 12th state the CFTC has sued over jurisdiction. The regulator has filed briefs in four federal appeals courts and one state supreme court, while the Justice Department and CFTC separately challenged Arkansas Attorney General Tim Griffin’s action against Kalshi.
In a July letter, 44 state attorneys general argued that Congress never gave the CFTC power to regulate sports bets as derivatives. They said sports wagers lack the hedging or price-discovery role of derivatives. States also have tax revenue to protect: the National Conference of State Legislatures cited an American Gaming Association estimate that prediction markets may have diverted more than $1 billion in state sports-betting taxes.
The legal conflict has divided appeals courts. The Third Circuit sided with Kalshi, prompting New Jersey officials to petition the Supreme Court over whether the Dodd-Frank Act prevents states from enforcing gambling laws against sports contracts offered on CFTC-registered exchanges. The Ninth Circuit ruled the other way, while the Sixth Circuit denied interim relief. Stanford law professor Joe Grundfest expects the Supreme Court to take up the dispute, though justices have not yet agreed to hear it. Kalshi’s response is due December 7.
Uncertainty hangs over a sizable market. As of November 14, DefiLlama tracked $6.24 billion in seven-day prediction-market trading volume across 138 protocols, with Kalshi accounting for $4.54 billion and Polymarket $1.33 billion. Conflicting state rules could raise compliance costs, restrict market access and fragment trading liquidity. Selig remained firm: “Our view on the statute is that we have exclusive jurisdiction over these markets.”
