CFTC draws mixed industry and state feedback on prediction market rule

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CFTC prediction market rule feedback

Highlights

Kalshi, Polymarket, Coinbase, and Andreessen Horowitz back the CFTC's exclusive jurisdiction over prediction markets, amid active legal disputes with at least five states challenging sports event contracts as unlicensed gambling.
State regulators from Tennessee, Missouri, and Pennsylvania urge the CFTC to withdraw support for sports event contracts, asserting such products fall outside federal jurisdiction and should be regulated as gambling by states.
Following a U.S. Senate ban on prediction market use by members and staff, Kalshi and Polymarket implement stricter insider trading controls and restrict access for certain users, including politicians.

Comment process sharpens oversight debate

As reported by Cointelegraph, the proposal stems from a March CFTC rulemaking that would allow the regulator to revise or create new rules for event contracts listed on prediction market platforms. The comment period ends on Thursday and draws submissions from companies active in prediction markets, crypto firms and advocacy organizations.

Kalshi co-founder and chief operating officer Luana Lopes Lara says in a Thursday letter that the CFTC’s existing framework is "well-designed and effective" and urges the agency to issue guidance so that event contracts can continue to be listed, traded and overseen by the commission. Polymarket U.S. CEO Justin Hertzberg also backs CFTC Chair Mike Selig, saying the agency should continue to exercise exclusive jurisdiction over prediction markets.

The proposed rule arrives as the commission seeks to reinforce its authority over the sector while several U.S. states challenge sports-related prediction contracts as unlicensed gambling. Kalshi, Polymarket and Coinbase are among the companies sued over sports prediction market offerings, while the CFTC supports the view that these platforms fall under its sole authority and sues at least five state governments that move against them.

Venture capital firm Andreessen Horowitz also supports the regulator, arguing in its letter that state action to restrict or ban prediction markets creates a barrier to impartial access, which is a core requirement for CFTC-regulated firms.

State regulators and consumer groups press for limits

State gambling regulators in Tennessee, Missouri and Pennsylvania criticize the CFTC’s defense of sports event contracts and urge the agency to withdraw that support. Pennsylvania Gaming Control Board Executive Director Kevin O’Toole says the regulator is allowing prediction markets to masquerade as unregulated sportsbooks, while Tennessee Sports Wagering Council Executive Director Mary Beth Thomas disputes that such sports event contracts fall within the CFTC’s jurisdiction at all.

Missouri Gaming Commission Executive Director Michael Leara says Congress did not intend futures markets to include gambling activities and calls on the CFTC to leave jurisdiction over sports event contracts to the states. The dispute underscores a broader regulatory fault line between federal derivatives oversight and state sports betting enforcement.

Prediction markets also face pressure from some federal lawmakers over contracts tied to elections and geopolitical events, including concerns that traders with insider knowledge could misuse the platforms after well-timed bets linked to the Iran war. Better Markets CEO and co-founder Dennis Kelleher and 12 other consumer groups tell the CFTC in a joint letter that it should prohibit event contracts involving elections or geopolitical events, arguing such products could influence government actions.

Kalshi and Polymarket say last week, after the U.S. Senate passes a ban on members and staff using prediction markets, that they are tightening controls on insider trading and restricting some users, including politicians, from their platforms.

In our earlier report on the federal-state clash over prediction markets, we covered how regulators are battling over whether platforms like Kalshi and Polymarket fall under the CFTC’s exclusive authority for event contracts. We also noted Andreessen Horowitz’s support for the CFTC’s position, arguing that state-level restrictions could undermine impartial market access and drain liquidity as trading volumes rise.

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