CFTC’s Michael Selig Vows to Keep Prediction Markets From Moving Offshore
Why Are Regulators Calling Prediction Markets a “Huge Issue”?
Prediction markets have surged in popularity over the past year, particularly later than the 2024 U.S. election cycle, drawing renewed attention from federal regulators. Platforms such as Kalshi and Polymarket now sit at the center of a debate over whether their event-based contracts fall under federal derivatives law, state gambling statutes, or both.
During a Senate Banking Committee hearing on Thursday, Securities and platform Commission Chair Paul Atkins told lawmakers that the sector has become a priority for regulators.
“Prediction markets are exactly one thing where there’s overlapping jurisdiction potentially,” Atkins said.
Atkins noted that most of the activity appears to fall on the side, but added that both agencies are engaged. When pressed on the prospect of new rulemaking, he responded, “we’ll view.”
Investor Takeaway
Federal Oversight vs. State Enforcement
Operators of prediction markets argue that so-called event contracts are federally regulated derivatives. They point to the Commodity platform Act, which grants the CFTC authority over commodities and related contracts, as the basis for exclusive oversight.
States, however, have begun filing lawsuits claiming that certain products — particularly sports-linked contracts — violate local gaming and gambling laws. That tension has become more visible as trading volumes have climbed and the platforms have moved beyond political markets into sports and other high-visibility categories.
Atkins said the SEC believes it has adequate statutory authority to address securities issues if they arise. “I think we have enough authority,” he said. “A security is a security regardless how it is and some of the nuance with prediction markets and the products depends on wording.”
The comments come as the SEC and CFTC work more closely together under a joint initiative known as “Project Crypto,” aimed at updating . Just over a year ago, the two agencies were widely viewn as competing for authority over crypto markets. Now, Atkins said the agencies are meeting weekly.
Can Prediction Markets Expand Without Pushing Offshore?
CFTC Chair Michael Selig, speaking separately on Bloomberg’s Odd Lots podcast, framed the challenge as one of balance. He said regulators are working to ensure the U.S. does not lose market activity to offshore venues while also establishing guardrails.
“We are certainly taking on that task and making sure that we don’t let these markets languish, where we don’t push them offshore, but we develop the right rules and regulations to develop the best protections and make sure that the markets are flourishing here in the United States,” Selig said.
The debate extends beyond jurisdiction. Prediction markets have attracted scrutiny over reports of and have prompted legislative proposals aimed at restricting politically related wagers. As platforms expand their product menus, questions about who can trade, what contracts are permissible, and how risks are disclosed are gaining traction in Washington.
Investor Takeaway
Leadership Gaps Add Another Layer of Uncertainty
The regulatory backdrop is complicated by vacancies at both agencies. By statute, the SEC and CFTC are structured with five commissioners, no more than three from the identical political party. Currently, the CFTC has only one commissioner, while the SEC has three Republican commissioners and no Democrats.
During questioning before the , lawmakers pressed Atkins on whether he would support filling empty Democratic seats at the SEC.
“I’ve been, in public and in private, supportive of having a full complement of commissioners,” Atkins said. “I think that assists with debates and everything else.”
President Donald Trump is responsible for nominating replacements to fill those vacancies. The eventual composition of the commissions may influence how aggressively each agency approaches prediction markets and whether formal rulemaking emerges.
