TLDR
- The White House is reviewing a CFTC proposal for regulating prediction markets.
- The proposal covers event contracts under the Commodity Exchange Act.
- Trump said the CFTC should keep authority over prediction markets.
- Several states argue prediction markets should fall under gambling laws.
- Courts may decide whether the CFTC or states control event-contract rules.
A proposed rule from the Commodity Futures Trading Commission on prediction markets is now under White House review, according to a filing from the Office of Information and Regulatory Affairs. The review comes as President Donald Trump publicly backed the agency’s authority over platforms such as Kalshi and Polymarket.
The filing shows that OIRA received the CFTC’s proposed rule on event contracts under Section 5c(c) of the Commodity Exchange Act. The details of the proposal have not been made public. A CFTC spokesperson said the commission submitted the notice of proposed rulemaking through the standard interagency process and would provide more information after the review is complete.
Prediction markets allow users to trade contracts tied to real-world events, including elections, sports, economic data and policy decisions. The sector has grown quickly, while regulators, states and courts continue debating whether such products are financial contracts or gambling activity.
White House Reviews CFTC Event Contract Rule
The White House review began on the same day Trump posted that it was “critically important” for the CFTC to maintain authority over prediction markets. He said the United States should set national rules for the sector and remain ahead of other countries developing similar financial products.
CFTC Chair Michael Selig has argued that prediction markets fall under the agency’s authority when offered through regulated contract markets. In January, Selig withdrew a proposed rule that would have restricted trades linked to sports and politics, saying the agency would move toward writing new rules for the industry.
The CFTC also issued guidance in March for exchanges listing event contracts. The guidance said designated contract markets act as front-line regulators and must ensure contracts are not easily manipulated or used for abusive trading.
Concerns over insider trading have grown as prediction markets expand into political events and military-related contracts. Congressional lawmakers have also opened a review of Kalshi and Polymarket after suspicious trades raised questions about whether some users had access to non-public information.
States Push Back Against Federal Control
Several states have challenged the CFTC’s position and moved to restrict prediction market platforms. State officials argue that many event contracts resemble gambling and should be regulated by state gaming authorities.
Minnesota Governor Tim Walz recently signed the first state-level ban targeting prediction markets. New York Attorney General Letitia James sued Coinbase and Gemini, alleging that their prediction market platforms were running illegal gambling operations in New York.
Wisconsin sued several platforms, including Coinbase, Kalshi, Robinhood, Polymarket and Crypto.com, over alleged illegal sports betting activity. Illinois Governor J.B. Pritzker signed an executive order barring state officials and employees from using confidential information to wager on prediction markets.
The CFTC has filed lawsuits and court briefs against some state actions, arguing that states cannot override federal jurisdiction over federally regulated event contracts. The dispute is expected to remain active in federal courts.
Former CFTC and SEC Chair Gary Gensler told CNBC that he does not believe the CFTC has the authority or capacity to regulate prediction markets under the 2010 Dodd-Frank Act. He said states should oversee products that resemble sports betting and gaming activity.
Political Debate Grows Around Prediction Markets
The issue has also become part of a wider political debate. Trump criticized several state officials who oppose federal control, including Christie, James, Walz and Pritzker. Pritzker responded by saying Illinois acted to prevent insider trading in online prediction markets.
Trump’s family ties to prediction market firms have drawn further attention. Donald Trump Jr. has invested in Polymarket through 1789 Capital and serves as a strategic adviser to Kalshi.
A recent New York Times report said some CFTC career officials had raised concerns about prediction market and crypto firms with links to Trump family business interests. The report said several officials were later placed on leave or sidelined. The CFTC has not publicly provided a detailed response to those claims.
Analysts say the White House review does not settle the legal fight. Jaret Seiberg of TD Cowen said the key issue remains before federal courts, where judges will decide how far CFTC authority extends over event contracts.
