With a new chairman, the CFTC looks set to introduce new regulations on prediction markets, who are at odds with state regulators. for sports related event contracts
Last Updated: February 03, 2026 at 5:09 PM UTC +1
Published: February 03, 2026 at 4:47 PM UTC +1
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Prediction markets are currently at a crossroad in U.S. regulation. On one side, the CTCF is suggesting it wants to modernize and clarify how “event contracts” should be supervised. On the other hand, state regulators and attorneys general consider sports event contracts to be circumventing state sports-betting regimes.
The result is a wave of lawsuits and pushback that could determine whether these markets are regulated like financial products, gambling, or something in between.
At the center of the potential rules change is Michael S. Selig, who was sworn in on December 22, 2025 as the CFTC’s 16th chairman. Per CFTC’s site, Selig said
We are at a unique moment as a wide range of novel technologies, products, and platforms are emerging, retail participation in the commodity markets is at an all-time high, and Congress is poised to send digital asset market structure legislation to the President’s desk.
It seems the agency is set to begin drafting “clear standards” for event contracts, the contract structure used by prediction markets to let users trade on outcomes across politics, sports, entertainment, and news.
Prediction markets are no longer niche. They’ve exploded in popularity while major platforms, like FanDuel, and consumer brands explore (or promote) event-based trading products, increasing political attention and the legal implications for regulators.
But the main reason for their popularity, sports, also opens potential for legal risk. National Public Radio’s reporting (published by Texas Public Radio) notes that prediction market leader Kalshi is embroiled in 19 federal lawsuits, many of which revolve around whether sports event contracts are “gambling” under federal law or effectively sports betting under state law.
Selig’s statements on his new role seem to indicate that the rulebooks around prediction markets need to be rewritten in meaningful ways. As of now, prediction markets’ argument lies in that they are overseen by the federal regulator, and not beholden to a state’s particular gaming laws and licensing required for operation in each US state.
There’s two key pieces of evidence that point to why market participants and state regulators are reading his remarks as a pivot from the status quo:
In May 2024, the Commission issued a Notice of Proposed Rulemaking (NPRM) to spell out types of event contracts it believes are “contrary to the public interest” under the Commodity Exchange Act (CEA). The proposal also made it clear the proposal treated betting on political elections as “gaming”, among others. This Notice became a reference point for the possibility that the CFTC might put legal brakes on whole categories of event contracts.
In September 2025, CFTC staff issued Advisory 25-36, discussing the legal and regulatory risks around sports-related event contracts. In particular, the Advisory noted that at least one federal court, US Court of Appeals for the Fourth Circuit, found the CEA does not automatically preempt state gambling laws as applied to sports event contracts. This came from a ruling on KalshiEX LLC v. Martin, the case of which originally stemmed from Maryland.
Legal analyses at the time remarked that the advisory, while framed as operational guidance, warned prediction market platforms that state challenges could interrupt or end the facilitating of sports contracts.
As these pieces of guidance get older and legal pressure mounts, everyone seems to look for clarity. Recent reporting indicates Selig intends to move towards developing a clear legal and regulatory framework for prediction markets rather than guidance and notices leaving massive gaps that resulted in the current legal battles.
On January 29, he made remarks at the CTCF-SEC meeting, claiming he was directing staff to withdraw the 2024 event contracts proposed rule and the 2025 Advisory 25-26. His main reasoning for the withdrawal was central to the issue: the CTCF actions have only led to uncertainty.
In addition, he revealed he has directed staff to begin work on “event contracts rulemaking” in order to establish “clear standards for event contracts”, because as it stands, the current framework is “difficult to apply”.
Selig is also considering how the CTCF positions itself in court battles, directing staff to reassess the Commission's participation in matters pending in federal district and circuit courts, while still implying that he will be defending the CFTC’s “exclusive jurisdiction” over commodity derivatives.
Prediction market operators argue sports event contracts are derivatives listed on a federally regulated venue (usually described as a CFTC-registered exchange) under the CEA. They see state enforcement as an intrusion into federal commodities oversight.
In the eyes of state gaming regulators and attorney generals, sports-linked contracts are essentially sports wagers, offered without state licenses, state consumer protections, or state tax structures. Furthermore, they argue that these markets make sportsbetting potentially available to audiences who would not qualify under state sports-betting rules, i.e. being underage while wagering.
This question of what prediction markets are actually offering is important because it affects everything else: which regulator has authority, what compliance regime applies, and whether platforms can exist nationwide in the US without a license from each of the 50 US states.
Two cases at the state level show why “federal vs. state” debate is not being solved quickly.
On January 20, 2026, Massachusetts Attorney General Andrea Joy Campbell announced a court order allowing a preliminary injunction to take effect against KalshiEX, LLC. The injunction prohibits Kalshi from accepting online sports wagers and related event contracts from Massachusetts customers unless the company complies with state sports-gaming laws, including obtaining a license by the Massachusetts Gaming Commission. As Cambpell summed up their effort, “The Court has made clear that any company that wants to be in the sports gaming business in Massachusetts must play by our rules – no exceptions”.
This move should make operators take notice. Massachusetts shows a state can move beyond warnings or cease-and-desist letters and obtain a court order that changes operations quickly, right as sports calendars drive peak engagement for platforms like Kalshi.
Nevada’s litigation reveals the other risk for platforms: even if a product is listed on a CFTC-regulated venue, courts may still allow some state enforcement.
On November 25, 2025, Yahoo Finance reported on a federal ruling in Nevada describing a Judge Aaron Gordon judge dissolving an injunction that had allowed Kalshi to keep offering sports event contracts in the state, putting the offering’s status at risk, after he had previously issued one in April. Gordon claimed his reversal was based on evolving facts of the case, namely in how definitions of swaps and events are now undergoing change. Nonetheless, the reversal did not end the case, as Kalshi is still in ongoing legal conflict with the state of Nevada.
Right now, prediction markets are caught in a tough spot. State litigation is moving on a case-by-case basis, while federal policymaking moves slower, but could reshape the entire playing field once a new framework is proposed and finalized.
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