The U.S. Commodity Futures Trading Commission has gathered more than 1,500 public comments on its proposed rule for prediction market event contracts, with submissions from operators, crypto firms, venture investors, and state gambling authorities revealing sharp divisions over who should oversee these products.
Operators Rally Behind CFTC's Exclusive Authority
Kalshi co-founder and COO Luana Lopes Lara called the current framework "well-designed and effective" in a letter submitted Thursday, urging regulators to provide clarity so "the universe of event contracts can continue to be listed, traded, and overseen by the Commission." She framed the rulemaking as a chance to reinforce existing oversight rather than impose new restrictions.
Polymarket's U.S. CEO Justin Hertzberg echoed that position in a letter to CFTC Chair Mike Selig, writing that the agency should continue "asserting the CFTC's longstanding exclusive jurisdiction over prediction markets." He added that the regulator must retain sole authority, aligning with ongoing legal disputes.
Andreessen Horowitz backed the CFTC, arguing that state-level efforts to regulate or block prediction markets create "a serious barrier to impartial access," conflicting with obligations placed on CFTC-regulated entities.
State Regulators Push Back on Sports Contracts
Pennsylvania Gaming Control Board Executive Director Kevin O'Toole said prediction markets are being allowed "to masquerade as unregulated sportsbooks." Tennessee Sports Wagering Council Executive Director Mary Beth Thomas stated her agency disputes "that sports event contracts offered on prediction markets fall within the jurisdiction of the CFTC at all." Missouri regulators voiced similar concerns.
Legal pressure from states has built alongside the rulemaking. Kalshi, Polymarket, and Coinbase each face lawsuits tied to sports-based event contracts, while the CFTC has taken legal action against at least five state governments to defend its jurisdiction.
Rule Tightens Oversight of Designated Contract Markets
In a March 12 staff advisory, the CFTC instructed designated contract markets to apply full Part 38 oversight to event contracts, with particular scrutiny on sports-related products. The agency said exchanges must comply with the Commodity Exchange Act through product review, surveillance, and ongoing monitoring. The guidance tied this requirement to Section 5(d) of the Act and Core Principle 3 under Part 38, placing responsibility on exchanges to act as frontline regulators as trading activity grows.
Lawmakers and Consumer Groups Call for Ban on Political Event Contracts
Dennis Kelleher, CEO of Better Markets, joined 12 advocacy groups in a joint letter urging the CFTC to "prohibit event contracts that involve elections or geopolitical events," arguing such markets could influence government decision-making. Recent scrutiny has extended to geopolitical betting, with lawmakers pointing to Iran war-related trades where well-timed positions raised questions about non-public information use.
The U.S. Senate passed a ban on its members and staff using prediction markets. Kalshi and Polymarket responded last week by strengthening insider trading controls and restricting access for certain users, including politicians.