Prediction Markets Score Major Win With CFTC Planning to Rewrite Trading Rules

Prediction Markets Score Major Win With CFTC Planning to Rewrite Trading Rules

State attorneys general and gaming authorities have filed lawsuits and issued cease-and-desist orders against prediction markets, securing a significant victory in their fight to keep selling contracts involving sports.

The Commodity Futures Trading Commission (CFTC) regulates derivative trading in prediction markets. Since they started enabling trading on the results of the 2024 presidential election and last year started trading sports, platforms like Kalshi and Polymarket have seen a sharp increase in popularity.

Only they have the legal power to decide on sports betting laws in their territories, according to state legislators and tribal governments. They contend that trading sports events on prediction markets amounts to sports gambling.

President Donald Trump selected Michael Selig as the new chair of the CFTC last October, and in the wake of the legal debacle, he claims the regulations governing derivatives would be revised to take into account the new prediction markets industry.

CFTC to Encourage Innovation in the Prediction Market 

Selig stated that he "would be remiss" if he did not discuss prediction markets, or event contracts as the CFTC refers to them, in an interview with Securities and Exchange Commission (SEC) Chair Paul Atkins on financial innovation.

“These markets are not new. They have operated within the CFTC’s regulatory perimeter for more than two decades. But, despite their history, many view them as novel or unsettled. That uncertainty has not served our markets well, nor has it served the public interest,” Selig said.

"It is time for clear rules and a clear understanding that the CFTC supports lawful innovation in these markets. I have directed CFTC staff to withdraw the 2024 event contracts rule proposal that would prohibit political and sports-related event contracts and the 2025 staff advisory, which cautioned registrants about offering access to sports-related event contracts due to ongoing litigation. While the advisory was issued at the staff level with the intent of bringing awareness to the litigation, it has instead contributed to uncertainty in our markets,” Selig explained.

In order to establish a federal legal basis for prediction markets to offer contracts on political and sporting events, Selig also stated that he has instructed CFTC employees to develop updated event contracts rulemaking.

Trump Advantage?

Trump's Trump Media and Technology Group is attempting to enter the prediction industry. Truth Social's parent company stated in October that it would launch Truth Predict in collaboration with CFTC-regulated Crypto.com.

Truth Predict intends to provide trading on a range of contracts, such as those related to politics and sports.

“Truth Social users will be able to trade prediction contracts related to major events and milestones, such as political elections, interest and inflation rate changes, commodity prices on gold and crude oil, events across all major sports leagues, and more, using the new product technology called ‘Truth Predict.’ Prices will update in real-time, allowing users to react instantly to developments in major current events,” a release from Trump Media read.  

The potential debut date of Truth Predict is unknown. Prominent sportsbooks have already started prediction markets, such as DraftKings, FanDuel, and Fanatics.