CFTC Asserts Exclusive Federal Authority Over Prediction Markets in Legal Battle

CFTC Chairman Mike Selig has reaffirmed the agency's commitment to establishing "exclusive regulatory authority" over prediction markets, signaling a continued legal offensive against state-level gambling regulations. Speaking at the Digital Assets and Emerging Tech Policy Summit, Selig emphasized that any validly offered product on a CFTC-regulated exchange—regardless of whether it tracks sports or politics—falls under federal jurisdiction. This stance positions prediction markets as derivatives products governed by the Commodity Exchange Act rather than local gambling laws. Selig argued that states do not have the ability to nullify federal oversight or substitute gambling laws where derivatives laws apply. The agency is currently leveraging a recent Third Circuit Court ruling to bolster its position. The CFTC is currently engaged in lawsuits against Arizona, Illinois, and Connecticut. Selig further indicated that the agency's legal challenges may expand, pointing to an amicus brief filed in a Ninth Circuit case, which includes Nevada. This suggests a systemic effort to clear the regulatory path for federally regulated prediction markets. Under the Dodd-Frank Act, the CFTC maintains the power to regulate swaps and block those deemed contrary to the public interest, such as contracts involving terrorism or assassination. Selig clarified that the agency's ability to perform a public interest analysis does not diminish its exclusive authority to regulate the underlying market structure. Looking forward, the agency is undergoing a formal rulemaking process to clarify its oversight of these markets. Additionally, the CFTC is reviewing feedback on a joint interpretation with the SEC regarding the self-certification of futures products tied to digital assets, aiming to create a clearer taxonomy for the industry.