The Commodity Futures Trading Commission is wasting no time in implementing the prediction market rulemaking agenda that Chairman Michael Selig first laid out in an expansive speech last week.
The commission announced on Wednesday that it has withdrawn both an internal advisory note regarding prediction markets’ legal considerations from 2025 and a proposed event contracts rulemaking from 2024. The withdrawals effectively shut the door on the CFTC’s current checks against the rise of the controversial platforms. Prior to Selig’s confirmation as chair, the CFTC had also dropped its legal appeal against election betting.
Selig stated in Wednesday’s press release that the actions “reflect the CFTC’s commitment to lawful innovation in our markets”, repeating a phrase he used in last week’s speech. He also took another opportunity to chide the Biden administration by calling the 2024 proposal a “frolic into merit regulation”.
“The Commission is withdrawing that proposal and will advance a new rulemaking grounded in a rational and coherent interpretation of the Commodity Exchange Act that promotes responsible innovation in our derivatives markets in line with Congressional intent,” he continued.
With regard to the internal advisory, which had warned CFTC licensees to “be prepared for all foreseeable conditions that may result” from prediction market lawsuits, Selig said that the notice “inadvertently created confusion and uncertainty for our market participants”.
Addressing various legal challenges to prediction markets
This ramp-up in activity from the CFTC only puts more pressure on the legal battles between prediction markets and states. Withdrawing previous guidance and proposing new rules were two of four event contract agenda items laid out by Selig last week.
The other two were an emphasis on collaboration with the Securities and Exchange Commission and, notably for the gaming industry, a reassessment of “the commission’s participation in matters currently pending before the federal, district and circuit courts”. Selig went on to add that the CFTC “has the expertise and responsibility to defend its exclusive jurisdiction over commodity derivatives”.
That declaration suggests the commission could wade into the plethora of prediction market lawsuits, this time in support of the sector. Numerous states and tribal entities have sued various prediction market operators in state and federal courts. Selig’s comments in recent days have directly referenced various legal questions that the lawsuits have centred around.
This includes the interpretation of the Commodity Exchange Act (the CFTC’s governing legislation), Congress’ intent in drafting the CEA and questions of jurisdiction.
Does the CEA’s existing language ban sports event contracts? Did Congress intend for the CFTC to allow event contracts and become a pseudo-gambling regulator? Do states and tribes have the ability to prevent event contracts from being traded on their lands? These are all questions that courts are wrestling with and the CFTC’s position is being made clear.
CFTC could be supercharged through new digital bills
A central aspect of the Trump administration’s federal financial policy is a massive new tranche of digital asset market legislation currently working its way through Congress. One bill, the Digital Asset Market Clarity Act of 2025, is currently held up in the Senate Banking Committee, facing pushback from some crypto interests.
But another bill, the Digital Commodity Intermediaries Act, has advanced out of the Senate Committee on Agriculture, Nutrition and Forestry, the same committee that oversaw Selig’s CFTC nomination. If passed, the Intermediaries Act would give the CFTC a vast array of new responsibilities, including:
- New definitions for digital commodities
- Consumer protections, including “conflict of interest safeguards”
- A new registration regime that facilitates “onshore liquid and resilient regulated markets”
- SEC-CFTC collaboration requirements
- Protections for software and technology companies
- New funding for the CFTC “to stand up a spot market regulatory regime”
“This is a critical step toward creating clear rules for digital asset markets. Advancing this bill brings us closer to a US regulatory framework that protects consumers while allowing American innovation and businesses to thrive,” Arkansas Senator John Boozman, chair of the Agriculture Committee, said in a statement.
Jess Marquez
Jess has covered the global gaming industry since 2022. A native of Reno, Nevada, he’d like to note that it’s Ne-va-da, not Ne-VAH-da.
Original article: https://igamingbusiness.com/legal-compliance/cftc-event-contracts-prediction-markets-support/
