"Prediction markets aren’t gambling"… U.S. CFTC 'warns' against state-level moves to regulate

The U.S. Commodity Futures Trading Commission (CFTC) has moved to mount a full-scale response against regulatory efforts by some state governments targeting prediction markets. Emphasizing that prediction markets are federally regulated derivatives markets under the CFTC’s exclusive jurisdiction, the agency signaled a looming court battle.

Recently, some U.S. states have been moving to effectively treat prediction-market platforms as "gambling" and fold them into existing gambling regulatory regimes. Last month, a Massachusetts court deemed sports event contracts offered by prediction-market operator Kalshi to be unlicensed gambling. As a result, attempts to regulate prediction markets on the same footing as the gambling industry appear to be spreading at the state level.

In response, CFTC Chairman Mike Selic said on X on the 16th (local time) that "U.S. prediction markets have faced lawsuits led by state governments," adding that "the CFTC has filed an amicus brief in court to defend its exclusive jurisdiction over these derivatives markets."

He said, "Prediction markets are not a new concept, and the CFTC has regulated this market for more than 20 years," adding that "prediction markets perform socially useful functions, including allowing ordinary Americans to hedge commercial risks such as rising temperatures or spikes in energy prices."

He also stressed that "prediction markets serve as an important check on the news media and the flow of information," underscoring that they are not simply a gambling business but a derivatives market that aggregates information through price signals.

Selic said, "The CFTC is taking steps to ensure these markets can become part of a derivatives market in the United States with integrity, resilience, and dynamism," adding, "To those who seek to challenge our authority in this area, let me be clear: we will meet you in court."