CFTC asserts jurisdiction over prediction markets

TLDR

The CFTC is publicly claiming exclusive federal authority over prediction markets, challenging states that treat them as gambling.

1. CFTC Chair Michael Selig directed the agency to file an amicus brief and wrote an op-ed asserting that prediction markets are commodity derivatives under its jurisdiction.
2. The move backs platforms like Kalshi, Polymarket, Coinbase and Crypto.com that run event contracts, including some crypto-linked markets, but puts the agency at odds with state regulators and some senators.
3. Court decisions in the Ninth Circuit and possibly beyond will determine whether federal derivatives law preempts state gambling laws, shaping where and how on-chain and centralized prediction markets can operate.

Deep Dive

1. What The CFTC Just Did

Chair Michael Selig has ordered the CFTC to file a friend of the court brief in the Ninth Circuit, supporting Crypto.com in its dispute with the Nevada Gaming Control Board and asserting the CFTCs exclusive jurisdiction over prediction markets classified as event contracts. In a Wall Street Journal op-ed and a video, he argued that these contracts are commodity derivatives regulated under the Commodity Exchange Act and warned state regulators, We will see you in court as they try to apply gambling laws to these markets. Coverage from multiple outlets notes that the CFTC now frames prediction markets as swaps and derivatives, not gambling products, and says it has regulated them for over two decades.

2. Why It Matters For Crypto Markets

The CFTCs stance directly affects platforms like Kalshi and Polymarket, as well as prediction offerings from Coinbase and Crypto.com, which often use crypto rails or stablecoins and are popular with crypto-native users. Nevada, Massachusetts, New York and others argue these contracts are unlicensed sports or election gambling and have brought enforcement actions, while the CFTC and industry groups warn that a patchwork of state laws would push activity offshore and weaken consumer protection. There is also a jurisdictional overlap with the SEC, which has signaled that some event-based contracts may be securities, adding a second federal layer on top of the state fight.

3. Litigation Path And Key Risks

The immediate battlefield is the Ninth Circuit case involving Nevadas restrictions on Crypto.com, alongside separate fights involving Kalshi and Polymarket, and conflicting lower court rulings suggest the issue could eventually reach the Supreme Court. Political pushback is strong, with Utahs governor and dozens of state attorneys general arguing that these markets are gambling and that Congress never gave the CFTC power over sports or election betting, while a group of senators has urged the agency to stop intervening in ongoing cases. Until appellate courts clarify whether event contracts are treated as federally regulated derivatives, state-regulated gambling, or sometimes securities, prediction markets will operate under legal uncertainty.

Conclusion

The CFTCs assertion of jurisdiction turns prediction markets from a gray-zone niche into a central test of where derivatives law ends and gambling law begins. For crypto-linked prediction platforms and users, this is less about short term price moves and more about whether a coherent federal framework emerges or activity is fragmented by state bans and overlapping regulators. The next appellate rulings will heavily influence whether regulated, US based prediction markets grow or whether activity continues to shift to offshore and fully on-chain venues.