The CFTC has filed a legal argument to defend its sole power

The power struggle for status

In a strong move to protect its jurisdiction, the Commodity Futures Trading Commission (CFTC) filed a third-party motion (amicus curiae brief) with the Ninth Circuit Court of Appeals , reaffirming its exclusive authority over forecast markets – also known as “ event contracts ” – as commodity derivatives under the Commodity Exchange Act (CEA).

This petition, announced by FTC Chairman Michael S. Selig on February 17 , directly challenges state-level efforts to classify these platforms as gambling and impose a ban, amid nearly 50 ongoing lawsuits targeting operators such as Kalshi, Polymarket, Crypto.com , and others.

This intervention marks a proactive stance under Selig, President Trump's appointee , who swiftly reversed earlier restrictive proposals and expressed support for the “ responsible development ” of these markets. As prediction markets are expected to explode in trading volume – handling billions of dollars in contracts on sports, politics, and events – this legal move could reshape the regulatory landscape, prioritizing federal oversight over the scattered gambling laws of individual states.

The rise of the forecast market

Prediction markets allow users to trade event contracts based on binary or categorized outcomes, such as election results, sports scores, economic indicators, or weather events. Platforms like Kalshi (registered with the CFTC) and Polymarket (decentralized, often affiliated with offshore companies) have seen explosive growth, with Kalshi alone reporting $1 billion in trading volume related to the Super Bowl this month.

These markets function as derivative instruments: participants hedge risk, speculate on probabilities, and aggregate information from the community to make better predictions. Formerly regulated as swap or futures contracts under the Commodity Exchange Act (CEA) , prediction markets faced intense scrutiny during the Biden administration, including a proposed regulation banning sports and political contracts. Selig withdrew that regulation shortly after confirmation and has since emphasized their value in hedging risk, portfolio management, and aggregating public information.

States (e.g., Nevada, Utah) argue that many contracts—particularly those related to sports—are essentially gambling, subject to state law. Lawsuits allege these platforms circumvent sports betting licensing laws, leading to bans and restrictions in jurisdictions with strict regulations. Crypto.com 's appeal in the case of North American Derivatives Exchange , Inc. et al. v. The State of Nevada ( succeeding in actions by the Nevada Gaming Control Board) became the basis for the CFTC's intervention.

Interconnection with cryptocurrency platforms

Many modern prediction markets operate on blockchain infrastructure or integrate stablecoin payments. This has blurred the lines between decentralized finance and regulated derivatives.

The CFTC's view emphasizes that even when infrastructure is decentralized, regulatory classification still depends on economic function, not technical architecture.

Event-based contracts tied to elections or policy decisions have attracted particular attention. Critics argue that such markets can influence public perception or encourage manipulation. Supporters counter that prediction markets improve information discovery and market efficiency.

Our review

The CFTC's legal position, aimed at protecting its sole jurisdiction over U.S. forecast markets, marks a pivotal moment in the development of event-driven trading. By asserting clear jurisdiction, the agency aims to bring these markets within the framework of existing derivatives law rather than leaving them in a state of legal ambiguity.

As prediction markets expand—particularly within cryptocurrency ecosystems—the outcome of this jurisdictional debate will shape how innovation, compliance, and market access develop in the United States.

Disclaimer: The information presented in this article is the author's personal opinion in the field of cryptocurrency. This is not financial or investment advice. All investment decisions should be based on careful consideration of your personal portfolio and risk tolerance. The views expressed in this article do not represent the official stance of the platform. We recommend that readers conduct their own research and consult with experts before making any investment decisions.

Compiled and analyzed by HCCVenture

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