White House review advances CFTC prediction market rulemaking amid state legal fight

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CFTC prediction market rule review

Highlights

The White House Office of Information and Regulatory Affairs is reviewing the CFTC’s proposed rule on prediction markets, advancing federal oversight momentum.
The CFTC, asserting exclusive jurisdiction, is suing five states over efforts to restrict platforms like Kalshi and Polymarket amid escalating legal disputes.
Donald Trump publicly backed CFTC Chair Selig's stance on exclusive jurisdiction, but TD Cowen said the legal debate will be resolved in federal courts.

Rulemaking review and federal oversight push

As reported by The Block, the White House Office of Information and Regulatory Affairs said on Tuesday that it has received the CFTC’s proposed rule on prediction markets and that the measure is pending review.

In an emailed statement, a CFTC spokesperson said the commission has sent its notice of proposed rulemaking on event contracts under Section 5c(c) of the Commodity Exchange Act to OIRA through the standard interagency process. The spokesperson added that the agency expects to comment further once the review is complete.

The CFTC has spent the past year trying to reinforce its jurisdiction over prediction markets, where users place bets on outcomes tied to elections, sports and other real-world events, including sensitive issues related to war. In March, the agency issued guidance saying exchanges listing prediction market contracts should act as front-line regulators and ensure those contracts are not readily susceptible to manipulation or abusive trading practices.

Regulatory scrutiny has also intensified alongside concerns about insider trading. Lawmakers have examined prediction markets after suspicious trades linked to elections and U.S. military actions raised questions about market integrity.

State resistance and political fallout

CFTC Chair Michael Selig is taking an expansive view that prediction markets fall under the agency’s exclusive jurisdiction, and the commission is suing Wisconsin, Illinois, Arizona, Connecticut and New York over efforts to restrict platforms including Kalshi and Polymarket. The broader dispute over whether states or the CFTC control the industry is continuing in federal courts, while states argue the platforms violate local gaming and gambling laws, especially around sports betting.

Trump weighed in on Tuesday by publicly backing Selig and calling it critically important for the CFTC to hold exclusive jurisdiction over prediction markets. He also attacked several state officials, including former New Jersey Governor Chris Christie, New York Attorney General Letitia James, Minnesota Governor Tim Walz and Illinois Governor JB Pritzker.

Pritzker answered in a post on X, saying Illinois acted to prevent insider trading through online prediction markets and accusing Trump of trying to stop states from regulating the sector. The political clash also comes as Donald Trump Jr. has invested in Polymarket through venture capital firm 1789 Capital and serves as a strategic adviser to Kalshi.

In a Wednesday note, TD Cowen Washington Research Group Managing Director Jaret Seiberg said Trump’s intervention is unlikely to alter the underlying legal debate over event contracts because the matter is before federal courts rather than regulators or the executive branch.

Our earlier report on the proposed U.S. vetting plan for frontier AI models described how growing concerns about misuse and systemic risk pushed Washington toward a formal pre-release review process. It also noted that the Trump administration delayed the draft order amid policy objections and lobbying, highlighting the ongoing tension between tighter oversight and fears of constraining innovation and U.S. competitiveness.

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