CLARITY Act Could Expand CFTC’s Grip on Prediction Markets

As Congress debates oversight of prediction-market platforms, legal experts say a digital-asset market structure bill under consideration could bolster the Commodity Futures Trading Commission’s regulatory reach.

Cointelegraph reported on July 21 that the House Agriculture Committee’s Subcommittee on Commodity Markets, Digital Assets, and Rural Development held a hearing on consumer protection and market integrity in sports event prediction markets. At the hearing, Karl Kennedy, a partner at New York law firm Katten Muchin Rosenman, said the CFTC lacks the staff needed to fully regulate and enforce rules for prediction-market platforms such as Kalshi and Polymarket.

Kennedy said the CLARITY Act, a digital-asset market structure bill under consideration in the Senate, could give the CFTC added authority over prediction markets as well as digital assets. He added that the agency needs broader powers and enough staffing to respond to cash markets, digital assets and the rapidly growing prediction-market sector.

Mike Selec, the acting chairman of the CFTC, has argued that event contracts on prediction-market platforms qualify as swaps under the agency’s jurisdiction, giving the regulator exclusive authority over those platforms. That position has clashed with some state governments that want to regulate prediction markets themselves.

Last week, Selec drew criticism after directing Kalshi to ignore a Michigan state court ruling, leaving the platform in what critics called an impossible position between state and federal authorities. Some lawyers say the dispute could ultimately reach the U.S. Supreme Court.

Republican senators leading the CLARITY Act said they aim to hold a vote before Congress begins its August district work period and plan to release the full text of the bill soon. In June, gambling-industry groups petitioned the Senate to add language explicitly banning event contracts tied to sports and casino-style games.