The appointment of Michael Selig as the new chair of the Commodity Futures Trading Commission (CFTC) sparked a new regulatory approach to crypto and event contracts.
In an op-ed for The Washington Post, Selig announced the launch of the new CFTC “Future-Proof” initiative aimed at establishing a modern regulatory framework as the agency adapts to emerging technologies, including cryptocurrencies and controversial sports event contracts.
“Under my leadership, the CFTC is charting a new course,” said Selig. “The CFTC and other financial regulators must develop clear and fit-for-purpose regulations that allow entrepreneurs to build new things, while continuing to protect the public from fraud, scams and market manipulation.”
Under Selig’s leadership, the CFTC is planning to undergo a comprehensive review of its existing rules and regulations. The review will allow the CFTC to identify where it needs to make changes to adequately regulate innovative products, including event contracts.
“Just as American businesses are modernizing legacy financial systems by harnessing new technologies, the CFTC must upgrade its approach to unleash innovation,” continued Selig.
How Selig plans to approach CFTC regulation
Last year, Selig’s confirmation process led to questions from the Senate Committee on Agriculture, Nutrition and Forestry about his potential approach to sports event contract regulation. Selig deflected questions by committee members about sports event contracts and declared that he would “defer to the courts” on the matter.
Selig’s new Future-Proof initiative takes a hands-off approach to CFTC regulation across the board, including prediction markets.
“The CFTC’s approach should be to deliver the minimum effective dose of regulation—nothing more and nothing less,” added Selig. “This means an end to policymaking through enforcement. And this means the agency’s policymaking divisions will develop clear rules of the road for market participants that will be codified through notice-and-comment rule-making to ensure that the regulatory requirements do not change wildly from administration to administration.”
The only time Selig mentioned prediction markets by name was to acknolwedge the rising popularity, but rather than suggest the audience for sites like Kalshi and Polymarket are casual participants looking to make money, focused on their use for financial hedging.
“Prediction markets have exploded in popularity as broad swaths of market participants seek to hedge portfolio risks and test their abilities to forecast truth,” he observed.
Trade groups take issue with CFTC protocols
Selig plans to inject a minimum dose of regulation into event contracts as key stakeholders in gaming call for increased regulatory guidelines and protocols for sports event contracts.
Last week, the American Gaming Association (AGA) and Indian Gaming Association (IGA) sent a letter to Congress members opposing the CFTC’s self-certification process for prediction markets. The process allows prediction markets to offer trading on sports events that resemble single and parlay sports wagering. The AGA and IGA consider the ability to self-certify event contracts an exploitation of the CFTC and an undermining of state law and tribal sovereignty. The AGA and IGA believe adding event contract language to the newly introduced federal crypto bill provides a “bipartisan opportunity” to ban prediction markets from offering event contract trading that resembles sports betting and casino gaming.
The NCAA also made an inquiry about event contracts that are tied to college sports. NCAA President Charlie Baker also sent a letter to the CFTC, requesting a suspension of event contract trading on college sports unless enhanced protections are put in place.
