A top Wall Street regulator is throwing his weight behind the betting markets in a high-stakes fight against states over sports betting.
In a court filing Tuesday, the Commodity Futures Trading Commission said it is the exclusive regulator for prediction market operators in the U.S., undercutting the states’ argument the markets should be subject to the same state gaming laws that apply to sportsbooks and casinos.
The clash could shake the growing market for legal sports betting.
Kalshi, Polymarket and other prediction markets operate CFTC-regulated financial exchanges that allow wagers on everything from the Winter Olympics to elections to the existence of aliens. But states like Nevada, New Jersey and Massachusetts argue that, because the prediction markets allow sports wagers, they are no different than state-regulated gambling platforms. Americans wagered almost $150 billion on sports in 2024, according to the American Gaming Association.
Now, CFTC Chair Michael Selig is going on the offensive to defend his agency’s authority over the markets. The filing marks one of his first moves since taking over the agency two months ago after being nominated by President Donald Trump. In a series of posts on X and in several media appearances, Selig sided with the prediction markets’ argument: Only the CFTC can regulate them.
“The CFTC is taking an important step to ensure that these markets have a place here in America and have the integrity and resilience and vibrancy that our derivatives markets deserve,” he said on X. “To those who seek to challenge our authority in this space, let me be clear: We will see you in court.”
Selig has been signaling a friendlier regulatory environment for the prediction markets for weeks. But the agency’s push Tuesday pits him against a bipartisan collection of state officials, gambling companies and lawmakers.
Utah Gov. Spencer Cox, a Republican, hit back on social media, saying the prediction markets Selig was “breathlessly defending are gambling—pure and simple,” and they have “no place in Utah.” Sen. Catherine Cortez Masto, a Democrat from Nevada, said in a statement that Selig’s CFTC is stepping on states rights and “Congress did not give the CFTC the authority to regulate sports gaming or gambling of any kind — that is a power that falls to the states.”
Former New Jersey Gov. Chris Christie told POLITICO Selig and the CFTC are “showing absolutely no respect or regard for states’ rights.” Christie is an adviser to the American Gaming Association — a traditional gaming industry group that opposes the prediction markets’ sports offerings.
“A bet is not an investment,” Christie said in an interview. “He calls them derivatives. The derivatives market is something where someone can bet on how many strikeouts Gerrit Cole will have for the Yankees on Opening Day? I mean, come on. It’s ridiculous. It’s a bet, and they should comply with the law.”
A CFTC spokesperson said in a statement the agency has been overseeing prediction markets since the early 1990s. The CFTC “will provide clear rules of the road to ensure these markets continue to flourish while preserving market integrity and customer protection,” the spokesperson said.
Prediction markets once existed in a small, largely academic corner of finance. But since the 2024 election, the markets have become a ubiquitous force in both finance and media — capturing the attention of major Wall Street stalwarts like the New York Stock Exchange’s parent company and partnering with major news outlets like CNN and CNBC. Donald Trump Jr. is now advising both Kalshi and Polymarket.
How to regulate them has been a delicate topic in Washington. Under former President Joe Biden, the CFTC sought to hamstring what types of products the markets could offer with an express ban on areas like elections and sports. That plan was never finalized.
Now, the markets are riding high, thanks in large part to Trump. But the state-led legal fight has dogged them for much of the last year. The CFTC’s filing Tuesday, which was specific to a case in the San Francisco-based Ninth Circuit Court of Appeals that involves Nevada and Crypto.com, could make them even more influential.
“We agree with Chairman Selig — the CFTC has regulated these markets for decades, and they are best equipped to ensure market integrity,” the Coalition for Prediction Markets, an industry group representing Kalshi, Crypto.com and other prediction-market operators, said in a statement.
The group added that a “patchwork of state regimes would create uneven protections for consumers and incentives to move more activity offshore, undermining customer safeguards.”
Republicans like Sens. Bernie Moreno of Ohio and Bill Hagerty of Tennessee also applauded the CFTC’s move on social media. And former CFTC Chair Chris Giancarlo, who led the agency in the first Trump administration, said Selig is “on the right course.”
“These markets are not going to work if they’re chopped up piecemeal by the states,” said Giancarlo, whose law firm, Willkie Farr & Gallagher, represents Polymarket. “And quite frankly, the states can’t police these like the CFTC.”
Other former officials, such as former CFTC Chair Timothy Massad, are worried the CFTC doesn’t have enough resources to oversee the prediction markets.
Massad, who led the CFTC during the Obama administration, said the agency doesn’t “have the expertise or staff that they need to police these markets,” which he said present novel questions such as the risk of insider trading. But that isn’t stopping Selig.
“He’s becoming an advocate” for the markets, Massad said. “He’s jumping in all the way.”
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