Senators urge barring CFTC funds for prediction-market suits

Seventeen Democratic senators asked the Senate Appropriations Subcommittee on Financial Services and General Government on Wednesday to bar the Commodity Futures Trading Commission from using federal funds in legal actions led by Chair Michael Selig against state gaming regulators over online prediction markets.

The letter was led by Senators Richard Blumenthal and Jeff Merkley and joined by 15 colleagues. It says Selig has argued that event contracts offered on prediction platforms qualify as “swaps” and therefore fall under the CFTC’s exclusive jurisdiction. The senators requested a funding restriction to prevent the agency from supporting those lawsuits.

“Through engaging in this campaign of litigation and intimidation, the CFTC risks becoming an instrument and enabler of online prediction markets’ efforts to bypass states’ consumer protections and oversight, creating a race-to-the-bottom in gambling,” the letter said.

The CFTC has been involved in cases tied to prediction markets in Connecticut, Illinois, Arizona, Kentucky, Wisconsin, New York, Minnesota, Rhode Island and New Mexico as of June. Platform operators including Kalshi and Polymarket have filed suits against state authorities and have backed the CFTC’s position that federal authority preempts state restrictions on these contracts.

Selig is acting as the agency’s sole commissioner and has led the CFTC’s enforcement strategy on prediction markets. The White House has not announced any nominations to fill the remaining commissioner seats.

Legal analysts say one or more of the disputes could reach the U.S. Supreme Court. The court’s 2018 ruling in Murphy v. National Collegiate Athletic Association affirmed that states can regulate sports betting; a granted writ of certiorari in a prediction-market case could prompt the justices to consider the boundary between federal oversight and state regulation.

The issue intersects with pending legislation. The Senate is expected to consider the Digital Asset Market Clarity Act, which would define regulatory roles for the CFTC and the Securities and Exchange Commission. Trade groups representing gaming interests have urged senators to add language excluding sports-event contracts from federal jurisdiction.

The senators asked the appropriations subcommittee to prevent federal funds from financing the CFTC’s lawsuits against state regulators. The restriction would limit the agency’s ability to pursue those cases while related legal and legislative matters proceed.