A key federal regulatory commission has announced that it will be fighting against individual states' powers to regulate prediction markets.
Mike Selig, chairman of the US Commodity Futures Trading Commission (CFTC), wrote in an editorial published by the Wall Street Journal on Tuesday that his agency has exclusive powers to regulate prediction markets, and that it would be backing an appeal by Crypto.com aimed at overturning state regulations.
Selig, who was appointed to his post by President Donald Trump last year, said this action was necessary because the prediction markets "face an onslaught of state-driven litigation," with many states claiming that these markets are subject to their laws regulating gambling.
"The CFTC will no longer sit idly by," Selig declared, "while overzealous state governments undermine the agency’s exclusive jurisdiction over these markets by seeking to establish statewide prohibitions on these exciting products."
The CTFC commissioner also disputed that prediction markets constituted gambling, saying instead that they are derivative instruments of the kind that the CFTC was given sole jurisdiction to regulate under the 1936 Commodity Exchange Act.
"These exchanges aren’t the Wild West, as some critics claim, but self-regulatory organizations that are examined and supervised by experienced CFTC staff," Selig concluded. "America is home to the most liquid and vibrant financial markets in the world because our regulators take seriously their obligation to police fraud and institute appropriate investor safeguards."
Selig's announcement was greeted with skepticism by Emily Peterson-Cassin, policy director for the Demand Progress Education Fund, who warned the CFTC was making the same mistakes made by regulators that led to the 2008 global financial crisis.
"The 2008 financial crisis happened because we let bankers gamble on housing," said Peterson-Cassin. "Now the CFTC is trying to let gamblers gamble on every aspect of life. By moving to crush state safeguards for prediction markets in court, the CFTC is giving gambling companies a green light to prey on all Americans and is setting the stage for another financial crisis."
The CFTC announcement was also criticized by Republican Utah Gov. Spencer Cox, who said that state regulations for online betting markets are fundamentally different from the kinds of futures markets traditionally regulated by the commission.
"I don’t remember the CFTC having authority over the 'derivative market' of LeBron James rebounds," he wrote in a social media post. "These prediction markets you are breathlessly defending are gambling—pure and simple. They are destroying the lives of families and countless Americans, especially young men. They have no place in Utah."
Cox further vowed to "use every resource within my disposal as governor of the sovereign state of Utah, and under the Constitution of the United States to beat you in court."
Former Republican New Jersey Gov. Chris Christie also criticized Selig for trying to interfere in the rights of states to regulate betting markets, arguing that "sports betting is not a derivative, it’s gambling."
Ron Filipkowski, editor-in-chief of MeidasNews, raised suspicions about the effort to undo state regulations on betting apps and pointed to Donald Trump Jr.'s connections to popular prediction markets Polymarket and Kalshi.
As reported by the New York Times last month, Trump Jr. "is both an investor in and an unpaid adviser to Polymarket, and a paid adviser to Kalshi," as well as "a director of the Trump family’s social media company, which recently announced it would start its own platform called Truth Predict."
