The chairman of the Commodity Futures Trading Commission (CFTC) said on Thursday that he intends to steer the derivatives regulator towards embracing event contracts under a new federal regulatory framework for prediction markets, and implied that the commission would be ready to defend its jurisdiction over the vertical against states in court.
In his prepared remarks ahead of a joint fireside chat with Securities and Exchange Commission (SEC) Chairman Paul Atkins, new CFTC chief Michael Selig said that he would craft new rules for the kind of contracts that companies like Kalshi, Crypto.com, FanDuel and DraftKings now offer their users, including on sports.
“It is time for clear rules and a clear understanding that the CFTC supports lawful innovation in these markets,” said Selig in the remarks he delivered at the event, and which were published online by the CFTC.
CFTC abandons proposed sports contracts ban
Selig has instructed CFTC staff to withdraw a 2024 rule proposal that would prohibit political and sports-related event contracts, as well as a 2025 staff advisory that cautioned registrants to be prepared to potentially restrict what contracts are available in certain markets given the many lawsuits seeking preliminary injunctions regarding sports contracts.
The CFTC chief argued that while the intent of the advisory was to bring awareness to the litigation, it instead contributed to uncertainty. Now, the CFTC will move forward with drafting an event contracts rulemaking.
“Consistent with my commitment to fostering responsible innovation in crypto asset markets, I will continue to support the responsible development of event contract markets and the important role they play in the broader financial system,” he added. “For too long, the CFTC’s existing framework has proven difficult to apply and has failed our market participants. That is something I intend to fix by establishing clear standards for event contracts that provide certainty to market participants.”
Selig hints at active participation in court battles
Selig added in Thursday’s comments that he has directed staff to reassess the CFTC’s participation in pending court cases over sports event contracts at both the federal and circuit level.
“Where jurisdictional questions are at issue, the Commission has the expertise and responsibility to defend its exclusive jurisdiction over commodity derivatives,” he added.
There are active court cases involving Kalshi or other prediction market operators’ sports event contracts in numerous courts across the U.S. The CFTC has not formally weighed in on any of the cases, but Selig’s comments suggest his version of the commission would consider inserting itself into the conversation.
“We applaud Chairman Selig’s statements that the CFTC has ‘the expertise and responsibility to defend its exclusive jurisdiction’ over event contracts, and we welcome the participation of the Commission in matters where that jurisdiction is under attack,” said the Coalition for Prediction Markets, which includes Kalshi, Crypto.com, Robinhood, Coinbase and Underdog, in a statement on Thursday.
In Kalshi’s three active cases at the circuit court level, it’s likely too late for the CFTC to weigh in, as the windows in the Third and Fourth Circuits are closed and the deadline in the Ninth is fast approaching.
A notable change of tone
Selig was President Donald Trump’s new nominee to lead the CFTC after Brian Quintenz’s nomination was rescinded.
In contrast to his comments on Thursday, when he was grilled on how he would handle sports contracts at his confirmation hearing in front of senators in November, he said he would defer to court rulings.
“I intend to always adhere to the law and follow what judicial decisions tell me to follow,” he said at the time. “These are just very challenging, interpretive questions I will look to the courts on. I think it’s vitally important that the CFTC look to the courts on a lot of these issues. Of course, it’s vital that the CFTC ensure that those contracts are not being manipulated, that they’re not really susceptible to manipulation.”
Just last week, Selig summarized his plans for CFTC regulation of various products, writing in the Washington Post that the CFTC’s approach should be to deliver “the minimum effective dose of regulation — nothing more and nothing less.”
“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.”
That came after 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.
