CFTC's Prediction Market Proposal Draws Widespread Opposition from Lawmakers, Former Regulators

A Trump administration plan to regulate the booming prediction market industry is facing strong opposition from a diverse coalition of lawmakers, Native American tribes, and former regulators. Public comments reveal deep concerns that the U.S. Commodity Futures Trading Commission (CFTC) is exceeding its legal mandate by attempting to set boundaries for wagers on sports and other events.

The Proposed Regulation

The CFTC's proposal, issued last month, aims to define the scope of permissible event contracts — derivatives that allow users to place yes/no wagers on future outcomes. The agency seeks to prohibit contracts it deems outside the "public interest," including those based on crime, terrorism, assassination, or war.

Under the proposed framework for platforms like Kalshi and Polymarket:

• Acceptable markets would likely include wagers on sports scores, win-loss results, and tournament advancement.
• Unacceptable markets would likely be those based on player injuries, fighting, children’s sports, or refereeing decisions.

Questions of Authority

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Prominent critics argue that Congress never intended for the derivatives regulator to become a national arbiter of gambling. Former Democratic U.S. Senator Christopher Dodd, a co-sponsor of the landmark 2010 Dodd-Frank Act that granted the CFTC its authority over swaps, stated that lawmakers were "well aware of existing federal laws regulating gaming" and had "no intention of amending those laws."

That sentiment was echoed by former CFTC Chairman Timothy Massad, who wrote in a letter that the agency "has lost its way" and has lost sight of "the limits of its own authority." He noted the proposal prompted him to submit public comments for the first time since leaving the agency.

States' Rights and Gambling Concerns

Beyond the debate over federal jurisdiction, the proposal has drawn fire from local and state-level stakeholders. According to public comments, Native American tribes, traditional casinos, and local authorities in 20 states argue that sports wagering on these platforms constitutes illegal gambling that should remain under their control.

The Trump administration has generally supported the prediction market industry, arguing in court that registered markets for event contracts are permitted under federal law and that state authorities cannot interfere. The CFTC has no set timeline for issuing a final rule and is currently considering the public comments it has received.