Commodity Futures Trading Commission Chair Michael Selig continues his aggressive defense of federal oversight of prediction markets targeting opponents who question their legality and the limits of self-certification.
On Thursday, at the CFTC’s first Innovation Advisory Committee meeting, Selig proposed new rules for prediction markets. The meeting included panels on cryptocurrency, artificial intelligence and prediction markets.
“Today, prediction markets find themselves enduring the same type of assault from state and national politicians that plagued the Chicago Board of Trade for much of its early existence,” Selig said in prepared remarks.
“Although Congress gave the CFTC the exclusive authority to regulate DCMs (Designated Contract Markets) that offer trading in derivatives, many states seek to nullify federal law and apply state anti-gaming laws to DCMs.”
Selig outlined rules covering consumer protection, market design and product governess, while stressing the agency’s authority over federally regulated event contracts. Selig explained that recently proposed amendments to Rule 40.11 would clarify contracts involving gaming, war, terrorism and assassination.
The CFTC is also preparing amendments to its rules governing designated contract markets, including consumer protection requirements.
He stressed that the CFTC would continue to promote responsible innovation in lawful derivatives and defend the agency’s exclusive jurisdiction in court. There are more than 20 lawsuits ongoing between state gaming regulators and tribal organizations against prediction markets and the CFTC.
Kalshi co-founder Luana Lopes Lara told the committee that federally regulated prediction markets can provide stronger consumer protections than a state-by-state regulatory system.
“I’ve never heard a single argument on why state-by-state has better consumer protection than a federal framework,” Lopes Lara said.
CME Group Chairman and CEO Terry Duffy questioned the agency’s approach to self-certified contracts, noting some 2,500 contracts have been self-certified since the Trump administration took office in January 2025.
Duffy pointed out that the CFTC has not opposed one self-certified contract.
This week, Selig criticized New York Attorney General Letitia James, who last month sued prediction market Kalshi for running an unlicensed, illegal gambling operation. State officials are seeking $36 billion in fines, damages and restitution.
New York officials argue that Kalshi’s event contracts bypass state age restrictions, allowing 18-to-20-year-olds to wager, and lack a state gaming license. Under New York law, the legal age to gamble is 21.
“We’ve also protected federally regulated prediction markets from rouge state attorneys general like Letitta James, who seek to nullify federal law and push these financial markets offshore to unregulated and foreign venues,” Selig said Wednesday standing alongside President Donald Trump at a White House Innovation summit.
James and Gov. Kathy Hochul, D-N.Y., believe wagering on sports, elections, and cultural events is “quintessentially gambling” rather than legitimate commodities trading. Selig backs prediction markets claiming exclusive oversight of designated contract markets.
Kalshi, has described the lawsuit as “political theater,” but a federal judge has sided with New York officials, ruling the federal Commodity Exchange Act did not supersede state gambling law.
In response, Selig issued a notification of market emergency and ordered Kalshi to continue to operate in New York.
U.S. District Judge Lorna Schofield allowed New York to file a response to the CFTC order, which the federal agency opposed. Schofield set an August 31 deadline for New York to file their response and allowed the CFTC to respond by September 7.
Despite Selig’s support for prediction market companies, executives from Coinbase, Kalshi, Paradigm, and others were disinvited to Trump’s innovation summit with technology and cryptocurrency executives.
Victor Rocha, conference chairman with the Indian Gaming Association, believes the companies were disinvited because “it’s becoming too big of a distraction, and that kind of brazen power grab is just starting to play badly” in Congress.
“Prediction markets are becoming divisive,” Rocha said.
Rocha joined Better Markets Chief Operating Officer and Policy Director Amanda Fischer and IGA Chairman David Bean on the New Normal webinar on Wednesday to discuss the CFTC’s latest moves with prediction markets and cryptocurrency.
Fischer also expected the Clarity Act, which would regulate cryptocurrency, to ultimately fail to pass in Congress. The Senate did not vote on the Digital Asset Market Clarity Act before its August recess.
Senate Majority Leader John Thune, R-S.D., has filed cloture on a motion to revisit the bill on September 15, but the bill needs 60 votes to allow senators to discuss the measure.
“I don’t think they get to 60,” said Fisher, adding that there are many outstanding issues that need to be resolved and she wasn’t sure they could be before the vote.
Fischer expected the crypto industry to closely monitor the vote to “know who their friends and enemies are.” She suspected the industry will use the result to guide their political spending in the run-up to the mid-term elections in November.
On Wednesday, Fischer also criticized the CFTC’s decision to invoke emergency powers to allow Kalshi to continue to operate in New York despite a federal judge’s ruling.
Fischer noted that in her career she couldn’t think of an example of a federal agency working so closely with firms that are subject to litigation.
“It is obvious that the CFTC and the prediction markets have their lawyers working in concert,” Fischer said. “They are coordinating. It is the government moving in lockstep with a regulated entity to advance a legal strategy.”
Fischer added that if she was in Congress, she would seek to obtain communications to determine the level of integration between the federal agency and prediction market firms.
