Amanda Fischer, former chief of staff to Securities and Exchange Commission Chairman Gary Gensler during the Biden administration, has been a vocal critic of the Commodity Futures Trading Commission’s handling of prediction markets, calling them a violation of state and tribal sovereignty.
“We have long-standing state and tribal gambling laws that have been hard fought,” said Fischer, who is chief operating officer and policy director of Better Markets. “And these folks just parachute in and think that by slapping some tech on a product, they can evade all the laws.”
Fischer believes that Kalshi and other prediction market firms are failing to persuade lawmakers of their proposition because the Indian Gaming Association and others “are stepping up and explaining how this misconduct affects their constituents.”
“They’re having to pivot, they’re doing increasingly novel … strange gambits in court and through the rule-making apparatus to try to just grab at anything they can to get the most done by the midterms (in November) and by the end of President Trump’s term to future-proof their business model from future Congresses or future regulators who might not have such a favorable view,” Fischer said Wednesday during the IGA’s New Normal webinar.
In June, the CFTC issued a notice of proposed rulemaking to address prediction markets. The proposal would amend Rule 40.11, which bans certain event contracts from being listed on registered exchanges.
Those banned contracts involve terrorism, assassination, war, gaming or activity that is unlawful under federal or state law and is contrary to the public interest.
Fischer explained that the rule settled everything.
“Everybody understands what the rules of the game are,” she added. “They have this rule in place, then all of a sudden President Trump is elected, and you see the explosion of the prediction markets industry, who are asking for forgiveness not permission.”
Fischer criticized the CFTC and Chairman Michael Selig for stepping into state litigation over event contracts, taking the side of the prediction markets. The CFTC has sued nine states, including Arizona, Illinois, Kentucky Utah, Connecticut, and New York, over their efforts to regulate or ban prediction markets.
This month, a federal judge ruled that Utah can enforce its strict anti-gambling laws against Kalshi and other prediction markets, while in New York, the CFTC stepped in to protect Kalshi as the state pushes its $36 billion lawsuit.
The CFTC invoked emergency power to keep Kalshi operating despite the lawsuit. There are more than 20 lawsuits ongoing between state gaming regulators and tribal organizations against prediction markets and the CFTC.
In Nevada, gaming regulators have gone to court seeking to hold Kalshi accountable for what they say are violations of the preliminary injunction. The Nevada Gaming Control Board says the prediction market has not completely vacated the state and should pay $120,000 per day for noncompliance with the court’s order.
“So you know what we’ll do?,” Fischer said. “We’ll try to amend that rule that’s been in place for 14 years to try to basically do jazz hands at the court, and say ‘no, no, no, we’re actually just clarifying that prediction markets aren’t breaking the law right now.’ ”
Fischer described the CFTC’s strategy as trying to clarify that the rule wasn’t clear enough on what was banned, so they’re just going to tweak it to say this is what we meant when we said gaming.
“When we said gaming, we didn’t mean whatever everyone understands is gaming, which is sports betting, poker, casino games, all of that. They’re saying technically gaming doesn’t include sports. Doesn’t include poker. We’re just going to exclude games of pure chance from this.”
Fischer and Victor Rocha, moderator and IGA’s conference director, believe the issue over the legality of prediction markets offering sports event contracts will eventually be decided by the U.S. Supreme Court, but the industry and the CFTC are trying to refine this before it gets before the high court.
“As you all know, your side has not had a 100% win rate, but it’s pretty good. If I had to pick a side that I thought would win in court when it is all settled, it would be your side,” Fischer told attendees of the IGA’s webinar.
She stressed that rule-making was important because it gets comments into the official records about what the CFTC is trying to do. Fischer said Better Markets submitted comments on the proposed rulemaking not because the CFTC was going to listen to them, but as a signal to future jurists that there is a story behind this maneuver.
“It’s also important because it also creates another avenue with which to litigate with the CFTC,” she said. “So, this rule is highly vulnerable to challenge from folks with standing to do so.”
Fischer doesn’t believe prediction markets offering sports event contracts are legal but they could have hung back and not begun listing contracts on the NFL’s Super Bowl in 2025 involving the Kansas City Chiefs versus the Philadelphia Eagles. Instead, prediction market operators could have waited until Selig became chairman to amend the rule and then started offering these new products once the CFTC tried to reinterpret what gaming was.
“I still think they would have been vulnerable to challenge, because the CFTC just can’t reinvent what gaming means. But it would have been a stronger case in court,” she said. “But the problem with that is, it takes upwards of two years to do a rule-making in this environment.”
Fischer admitted that there was bipartisan support for cryptocurrency regulation in Congress but prediction markets are not that. She noted that there is a huge split within the Republican caucus in Congress that know that state Republican officials, law enforcement and their communities don’t like sports betting taken out of their state and tribal jurisdiction.
“It’s not as easy for the White House to embrace these prediction market folks, as it is for the crypto folks, because their own constituents are divided on it in a way they are not divided on crypto.”
