Commodity Futures Trading Commission (CFTC) chair Michael Selig again stepped up his rhetoric on the regulation of event contracts.
On Tuesday, Selig announced that the government agency filed an amicus brief in the case involving Crypto.com and the platform’s prediction markets in the U.S. Court of Appeals for the Ninth Circuit. He made the announcement one day after the Wall Street Journal published an op-ed from Selig in which he provided background on why the CFTC was stepping into the Crypto.com case.
“Over the past year, American prediction markets have been hit with an onslaught of state-led litigation,” said Selig in the announcement, posted to social media platform X. “In response, the CFTC has today filed a friend-of-the-court brief to defend its exclusive jurisdiction over these derivatives markets.”
Selig vows CFTC will not ‘sit idly by’
Selig is advocating for federal regulation of event contracts as state regulators, leaders and lawmakers make legal and regulatory attempts to combat the proliferation of sports event contracts. The CFTC aims to ensure that event contracts remain under the agency’s purview, despite claims that sports event contracts resemble state-sanctioned gambling.
“The most common allegation is that these contracts are a form of gambling and therefore subject to state laws,” wrote Selig in the op-ed. “The CFTC will no longer sit idly by while overzealous state governments undermine the agency’s exclusive jurisdiction over these markets by seeking to establish statewide prohibitions on these exciting products.”
He did not explicitly mention sports event contracts in his announcement or op-ed, but his plan to thwart state-led litigation on event contracts is a notable change of tone for the chair. Last year, during a confirmation hearing in the Senate Committee on Agriculture, Nutrition, and Forestry, Selig deflected questions regarding sports-related event contracts and said he would “look to the courts” for guidance on the issue.
A drastic change of tone
Since being confirmed as CFTC chair in December, Selig has altered his public stance, emphasizing his belief that the CFTC has complete regulatory authority over event contracts. He wrote in the op-ed that such contracts qualify as “swaps” under the Commodity Exchange Act (CEA) and that Congress granted the CFTC full authority over such contracts.
By filing an amicus brief, a legal document submitted to a court by an entity that is not a party in the lawsuit itself, Selig has firmly indicated that the CFTC will take a much more active role than he suggested at that hearing.
The CFTC’s amicus brief, filed in Crypto.com’s litigation against the Nevada Gaming Control Board (NGCB), outlines the legal history of the commission’s jurisdiction over all commodity derivatives markets, including prediction markets. “Over the years, courts and Congress have established and affirmed the CFTC’s role in regulating these markets,” said the CFTC in a statement.
Selig’s stance continues to draw concerns from lawmakers. Last week, a group of senators asked the CFTC not to rewrite its prediction market rules after Selig instructed staff to withdraw a 2024 rule proposal to ban political and sports-related event contracts and requested that the CFTC not embroil itself in legal disputes involving prediction markets. Those calls seem to have fallen on deaf ears.
“Today, the CFTC is taking an important step to ensure that these markets have a place here in America and have the integrity, resilience and vibrancy that our derivatives markets deserve,” continued Selig in the announcement shared via X. “To those who seek to challenge our [CFTC] authority in this space, let me be clear. We will see you in court.”
Crypto.com’s dispute in Nevada
The CFTC filed its amicus brief in Crypto.com’s litigation against the Nevada Gaming Control Board (NGCB). Along with separate filings from Kalshi and Robinhood, Crypto.com sued the Nevada regulator last year after receiving a cease-and-desist letter.
U.S. District Judge Andrew Gordon denied Crypto.com’s request for a preliminary injunction against the NGCB and Crypto.com subsequently pulled its event contracts in Nevada as its appeal process in the Ninth Circuit unfolds. Gordon initially granted a preliminary injunction to Kalshi but eventually dissolved his own prior ruling.
Crypto.com, Kalshi and Robinhood are preparing to present oral arguments to the Ninth Circuit Court in April, following a request by the board to consolidate the arguments for “judicial efficiency.” The amicus brief serves as the first legal involvement with the CFTC in a legal matter tied to event contracts.
In the meantime, judging by Selig’s comments, the CFTC will use the CEA as its basis for authority over event contracts. It is unclear whether the CFTC will join other prediction markets’ court battles, but Selig has made it clear that he is not afraid to lead the commission into litigation related to event contracts.
Meanwhile, Crypto.com continues to expand following a partnership with DraftKings. The deal allows Crypto.com to power DraftKings Predictions’ prop-style event contracts.
