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

As state attorneys general and casino authorities file lawsuits and issue cease-and-desist orders against the trading platforms, prediction markets have achieved a significant success in their fight to keep providing contracts involving sports.

Prediction markets run derivative trading regulated by the Commodity Futures Trading Commission (CFTC). Platforms like Kalshi and Polymarket have boomed in popularity since they began facilitating trading on the outcome of the 2024 presidential election, and last year, embarking into sports trades.

Tribal nations and state legislators assert that only they have the legal power to establish sports betting laws in their own jurisdictions. They contend that trading sports events on prediction markets amounts to sports gambling.

Following the legal debacle, Michael Selig, the new chair of the CFTC nominated by President Donald Trump in October of last year, has stated that the regulations pertaining to derivatives will be revised to take into account the growing prediction markets industry.

 

CFTC to Encourage Innovation in the Prediction Market 

In a discussion about financial innovation with Paul Atkins, the chair of the Securities and Exchange Commission (SEC), Selig stated that he "would be remiss" to ignore prediction markets, or event contracts as the CFTC refers to them.

“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.

Selig further stated that he has instructed CFTC employees to prepare revised event contracts rulemaking, which is anticipated to provide prediction markets with a federal legal foundation for offering contracts on political and sporting events.

 

Trump's Advantage?

Through his Trump Media and Technology Group, Trump's business empire is attempting to enter the prediction market. Last October, the parent entity of Truth Social announced a partnership with CFTC-regulated Crypto.com to launch Truth Predict.

Truth Predict plans to offer trading on various contracts, including sports and politics.

“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. Prediction markets have already been introduced by well-known bookmakers like DraftKings, FanDuel, and Fanatics.