Wall Street’s main derivatives regulator will write new rules for the multi-billion dollar prediction markets industry, the head of the Commodity Futures Trading Commission said Thursday.
“It is time for clear rules and a clear understanding that the CFTC supports lawful innovation in these markets,” Chairman Michael Selig said in prepared remarks. “Consistent with my commitment to fostering responsible innovation in crypto asset markets, I will continue to support the responsible development of event contract markets.”
Prediction market platforms like Kalshi Inc. and the US arm of Polymarket operate CFTC-regulated exchanges that allow customers to bet on the outcome of a wide range of future events, from presidential elections to the Super Bowl. Trading activity on the platforms has surged, despite opposition from some state gaming regulators.
The family of President Donald Trump has also entered the space. His son, Donald Trump Jr., became an advisor to both Kalshi and Polymarket, and Trump Media & Technology Group Corp. announced its own marketplace.
Spokespeople for Polymarket, Kalshi, Trump Media & Technology Group Corp. and Donald Trump Jr. didn’t immediately respond to requests for comment about the rulemaking.
The agency in 2024 under then-Chairman Rostin Behnam issued a proposal that called for banning sports and politics-related wagers on prediction markets. Selig said Thursday he’d formally withdraw that plan as well as a 2025 staff advisory that cautioned businesses from offering sports-related contracts due to ongoing litigation.
“While the advisory was issued at the staff level with the intent of bringing awareness to the litigation, it has instead contributed to uncertainty in our markets,” Selig said. He added the CFTC would defend its “exclusive jurisdiction” over commodity derivatives.
Sports trades have fueled activity on some exchanges, accounting for most of the trading volume on Kalshi, according to Dune Analytics.
Digital Assets
Selig became the head of the regulator in December. He made the announcement at a panel on cryptocurrency regulation and coordination with Securities and Exchange Commission Chairman Paul Atkins.
The heads of the regulators pledged to work together to draft crypto rules as lawmakers craft legislation to divvy up digital asset oversight between the two agencies.
The Senate Agriculture Committee on Thursday passed its version of market structure legislation, handing most authority to the CFTC to regulate spot commodities, like Bitcoin. A companion measure in the Senate Banking Committee has stalled over attempts to limit crypto exchanges’ ability to offer rewards tied to customer holdings of tokens.
While the two regulators can set out rules, formal legislation is still necessary, Selig said.
“We talk about future proofing the industry to make sure that the next Gary Gensler doesn’t come along and blow it all down,” Selig said, referring to the former SEC chairman who oversaw numerous enforcement actions against crypto firms.
