Trump Backs CFTC's Exclusive Jurisdiction Over Prediction Markets

Prediction markets let traders take positions on outcomes ranging from sports contests to elections. Their rapid expansion has put the Commodity Futures Trading Commission at the center of a jurisdictional fight over whether event contracts are federally regulated derivatives or gambling subject to state oversight. For CFTC-regulated designated contract markets, self-certification can speed listings, but exchanges must still show that each product complies with the Commodity Exchange Act, settlement rules and core principles.

The CFTC’s Division of Market Oversight issued its latest advisory on July 24, warning platforms including Kalshi, Coinbase, Polymarket and Crypto.com against broad, template-style filings that combine many contract permutations. Each proposed variation must include its terms, underlying commodity, settlement methodology, data sources and compliance analysis under Regulation 40.2, the agency said. The notice was the regulator’s second warning in several months, following guidance on March 12, though closely related contracts may still be certified as a class.

Prediction markets allow users to trade event contracts tied to outcomes ranging from elections and economic data to sports contests. The growth of platforms including Polymarket and Kalshi has sharpened a jurisdictional dispute: whether such products are financial derivatives overseen nationally by the Commodity Futures Trading Commission, or wagers subject to state gambling laws. The distinction matters because it could determine licensing, consumer-protection and market-integrity standards across the United States.

A House Agriculture subcommittee recently held a hearing to consider whether Congress should revise the rules as prediction platforms expand into sports-related contracts. Lawmakers focused on the boundary between the CFTC’s federal authority and enforcement by gambling regulators in all 50 states. Crypto and blockchain industry groups warned that a state-by-state approach could fragment national financial-market oversight, expose platforms to conflicting requirements and raise compliance costs.

Prediction markets allow participants to trade event contracts tied to outcomes such as elections and economic data, but sensitive subjects including war and gambling have long occupied a gray area between derivatives oversight and gambling laws. Uniform review standards from the U.S. Commodity Futures Trading Commission could affect the compliant operation of Polymarket and Kalshi in the United States.

The CFTC issued a staff advisory on prediction markets on June 10 and formally opened a rulemaking and public comment process. Event contracts involving war, gambling and other sensitive categories will be reviewed case by case. Chairman Mike Selig said the era of operating without clear rules was over, as the agency shifts its policy focus from litigation to rules established in advance. The document did not address trading amounts or penalties.

Prediction markets allow users to trade event contracts tied to outcomes such as elections and sporting events. The central dispute is whether these products are derivatives governed by the Commodity Exchange Act or wagers that states may regulate under gambling laws. The U.S. Commodity Futures Trading Commission argues that event contracts traded on designated contract markets fall under its exclusive federal jurisdiction. The ruling will affect whether platforms can operate across states under a single set of rules.

The Wisconsin Department of Justice sued five companies—Kalshi, Polymarket, Crypto.com, Robinhood and Coinbase—on April 23, 2026, accusing them of illegally offering sports betting. On April 28, the CFTC, together with the U.S. Department of Justice, filed suit in federal court in Wisconsin's Eastern District. It was the agency's fifth similar lawsuit against a state government. The complaint seeks a declaration that state gambling laws do not apply and a permanent injunction barring state enforcement, but requests no damages.

Prediction markets use “event contracts” that allow users to trade on outcomes including sports and elections. The Commodity Futures Trading Commission argues that contracts traded on a CFTC-registered designated contract market fall under the exclusive federal jurisdiction of the Commodity Exchange Act. New York considers them gambling. The dispute will determine whether states may also use gaming laws to restrict nationwide platforms, with at least eight markets and more than 3,000 contracts at stake.

On April 21, 2026, the New York Attorney General’s Office sued Coinbase and Gemini, alleging that they operated without state licenses and allowed users aged 18 to 20 to participate, below the state’s minimum age of 21. No fixed damages were disclosed; the state also seeks disgorgement of illegal profits and treble penalties. On April 24, the CFTC sued in the U.S. District Court for the Southern District of New York, seeking a declaration of federal preemption and an order barring state enforcement. Together with its April 2 lawsuit against Arizona and two other states, the action expands the dispute to four states.

Prediction markets allow users to trade on the outcomes of political, sporting and other events, with trading volumes reaching billions of dollars. The U.S. Commodity Futures Trading Commission argues that event contracts traded on designated contract markets are “swaps” governed by the Commodity Exchange Act, preempting separate state regulation under gambling laws. The dispute will determine whether platforms such as Kalshi and Polymarket can operate nationwide.

Represented by the U.S. Department of Justice, the CFTC filed separate lawsuits against Illinois, Arizona and Connecticut on April 2, 2026. Since April 1, 2025, the Illinois Gaming Board had issued cease-and-desist orders to three CFTC-registered markets: KalshiEx, Crypto.com and Polymarket. The federal government is asking the courts to affirm the CFTC’s exclusive jurisdiction and permanently bar state enforcement, without seeking monetary damages.

Prediction markets allow users to trade contracts tied to the outcomes of events such as elections and sporting contests. The U.S. Commodity Futures Trading Commission views them as derivatives, while state gambling regulators argue that they may oversee the markets under state law. The jurisdictional dispute will determine whether platforms such as Kalshi and Polymarket can operate nationwide under a single federal framework.

On April 6, 2026, CFTC Chair Mike Selig told the Vanderbilt University Digital Assets Summit that states lack the authority to regulate prediction-market providers and that the CFTC has exclusive jurisdiction over commodity derivatives markets. The CFTC has also taken legal action against Arizona, Illinois and Connecticut. The related report was published on April 12.