Trump administration shields prediction markets, challenges state
The new chairman of the commission, Michael Selig, announced the withdrawal of the regulation that sought to prohibit contracts on sporting and political events. In a strong defense of "legal innovation," the federal agency claims exclusive jurisdiction over these derivatives, directly confronting the stance of the American Gaming Association.
The regulatory uncertainty hanging over prediction markets in the United States has vanished overnight. In his first major public intervention alongside Paul Atkins, head of the Securities and Exchange Commission (SEC), the newly appointed chairman of the Commodity Futures Trading Commission (CFTC), Michael Selig, made it clear that the Trump administration will not be an obstacle for platforms like Kalshi or Polymarket. On the contrary, it will act as their legal shield.
During the "harmonization" event held in Washington DC, Selig confirmed a radical change in doctrine. The agency will abandon the "regulation by enforcement" strategy (case-by-case sanctions) used by previous administrations and will move to create a regulatory framework that integrates event contracts within the formal financial system. To make this promise effective, the official ordered the immediate withdrawal of the 2024 proposed rule that explicitly sought to ban bets on elections and sports, as well as the annulment of an internal warning note issued last September that created legal uncertainty.
The new CFTC regulatory framework to legalize sports event contracts
Selig’s central argument is based on a loose interpretation of the Commodity Exchange Act (CEA). While critics argue that betting on the outcome of a Super Bowl is "gambling," the new CFTC leadership classifies it as an "event contract" or financial derivative valid under federal law.
Selig emphasized that these markets are not new, as they have operated under CFTC parameters for two decades, but have suffered from a perception of instability. His action plan includes drafting new "event contracts" regulations that provide clear standards and certainty to market participants. This move seeks to capitalize on the precedent set by the 2024 court ruling in the Kalshi vs. CFTC case, where a federal court ruled that the agency had overstepped by trying to block election markets without solid justification in current law.
Jurisdiction conflict: The CFTC claims sovereignty against states and the American Gaming Association
The decision from Washington has hit the traditional gaming industry like a bomb. The American Gaming Association (AGA) and the Indian Gaming Association (IGA) see these markets as an existential threat operating without the same tax burdens as state casinos and sports betting houses.
According to AGA data, the proliferation of these unregulated state-level markets has caused an estimated fiscal loss of US$400 million in gaming taxes that went uncollected. However, Selig was blunt on the matter and ordered his team to reassess the commission’s involvement in ongoing litigation in federal and state courts. His message was a direct warning to local regulators: when it comes to commodity derivatives (which now include sporting events), the CFTC’s jurisdiction is exclusive and preemptive, which could nullify attempts by states like California or New Jersey to block these platforms.
Legislative progress: The Digital Commodity Intermediaries Act gains traction in the Senate
Administrative support comes alongside legislative movement. Prior to Selig’s speech, the Senate Committee on Agriculture, Nutrition, and Forestry advanced the Digital Commodity Intermediaries Act. This bill, passed by a narrow partisan margin of 12 to 11 votes, would grant the CFTC new powers and funding to regulate the spot market for digital commodities.
The legislation aims to create a registration regime that facilitates "liquid, resilient, and regulated markets on U.S. soil," establishing safeguards against conflicts of interest. For the Coalition for Prediction Markets, which groups companies like Kalshi, Robinhood, and Underdog, this is the ideal scenario. In a statement, the group applauded Selig’s defense of federal jurisdiction, interpreting it as the definitive step to legitimize their business model against attacks from the traditional casino lobby.
Tags: USA, United States, predictive markets, Coalition for Prediction Markets, Kalshi, Robinhood, Underdog, Polymarket