The new chairman of the Commodity Futures Trading Commission (CFTC), Michael Selig, has ordered agency staff to draft formal regulations for prediction markets, marking a significant shift in the regulatory policy for this sector in the United States. The decision, announced in his first public statements since taking office on January 29, aims to establish a clear regulatory framework for platforms that operate event contracts, including those linked to sports outcomes.
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Withdrawal of Previous Regulatory Proposals
As part of this change in direction, Selig instructed staff to withdraw two previous regulatory documents that had generated uncertainty in the sector. The first is a rule proposed in 2024 that would have prohibited political and sports-related event contracts. The second is a staff advisory issued in 2025 that warned registered platforms against offering sports-related contracts while ongoing legal proceedings continued.
This decision represents a notable departure from the more restrictive stance the CFTC had adopted in recent years, as it faced increasing pressure from state regulators, tribal gaming interests, and lawmakers concerned about the proliferation of these products.
Ongoing Litigation Over Sports Contracts
Currently, platforms like Kalshi and Crypto.com are involved in legal proceedings in several states regarding the legality of event contracts linked to sports. Critics of these platforms argue that the products function as de facto unlicensed online gambling, operating outside the established regulatory framework for sports betting.
Selig acknowledged that the 2025 advisory, designed to alert registrants to the legal risks arising from these judicial challenges, had “contributed to uncertainty in our markets” rather than providing clarity.
Prediction Markets: History and Need for Legal Certainty
In his statements, Selig emphasized that prediction markets are not a recent innovation. “They have operated within the CFTC’s regulatory perimeter for over two decades,” the official stated, noting that despite their history, many consider them novel or unstable.
The CFTC chairman argued that the existing regulatory framework has proven difficult to enforce and has failed to provide legal certainty to market participants. This lack of clarity, according to Selig, has benefited neither the markets nor the public interest.
Establishing Clear Standards
As a result of this diagnosis, the CFTC will move forward with drafting new rules for event contracts designed to establish “clear standards” and provide companies with the confidence to operate within the law. This approach seeks to strike a balance between allowing financial innovation and maintaining investor protection, safeguards against fraud, and market integrity.
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Warnings About Impact on Tribal Sovereignty
Siva warned that such platforms “flagrantly violate federal and state laws, undermine tribal sovereignty, compromise sports integrity, and inflict serious harm on consumers in all 50 states.” The tribal leader called on Congress to intervene to ban these products.
“It is more urgent than ever that Congress step in and insist that online gambling and sports betting through prediction markets are not legal anywhere, at any time, and for anyone with a smartphone,” he stated.
Opposition from the Regulated Gambling Sector
Concerns about prediction markets have intensified as platforms have rapidly expanded sports-related offerings, provoking opposition from the regulated gambling sector and lawmakers.
The American Gaming Association (AGA) and the Indian Gaming Association (IGA) urged Congress to intervene earlier this month, warning that these products function as illegal sports betting outside the established gambling framework, threatening state authority, tribal sovereignty, and consumer protection.
Outlook for the Sector
Selig’s decision to move forward with formal new regulation for prediction markets marks a defining moment for this sector in the United States. While the CFTC chairman argues that regulatory clarity will benefit both the markets and the public interest, critics fear that this openness will normalize what they consider unregulated sports betting accessible nationwide.
The development of this new regulation will occur against a backdrop of intense debate over the boundaries between legitimate financial innovation and gambling activities that require state licenses. The outcome of this regulatory process and the ongoing litigation will determine the future of platforms like Kalshi and Crypto.com, as well as the balance of power between federal regulators, state authorities, and tribal nations in overseeing sports betting in the United States.
