Key Takeaways:
President Donald Trump threw the White House's weight behind the CFTC's claim of exclusive jurisdiction over prediction markets, escalating a legal battle with at least three states that have moved to ban or restrict platforms like Kalshi and Polymarket.
U.S. President Donald Trump said it was "critically important" that the Commodity Futures Trading Commission retain exclusive authority over prediction markets, wading into a widening legal fight between federal regulators and at least three states that have moved to ban platforms including Kalshi and Polymarket.
"We cannot have SCUM like Chris Christie, Letitia James, Tim Walz, and JB Pritzker setting the rules," Trump posted on Truth Social late Tuesday, naming the former New Jersey governor, New York attorney general, Minnesota governor and Illinois governor. CFTC Chair Michael Selig, the agency's sole commissioner, has echoed that position in lawsuits against multiple states.
Minnesota this month became the first state to enact criminal penalties for operating prediction markets, with Gov. Tim Walz signing a public safety bill that takes effect in August. The CFTC sued Minnesota on May 19, arguing the law undermines its "exclusive jurisdiction over commodity derivatives." Similar legal battles are underway in Wisconsin, Illinois and three other states where the CFTC has filed lawsuits or amicus briefs. At stake is whether event contracts tied to sports and entertainment constitute gambling — which states say they can regulate — or novel financial instruments that fall under federal oversight.
The dispute is likely to reach the U.S. Supreme Court, Trump said, adding that "other countries are after this new form of financial market, and we want to remain at the top." The comment comes as Indonesia, Spain and India all banned prediction market platforms within the past week, while a U.S. House committee launched an investigation into Kalshi and Polymarket over insider trading concerns.
Kalshi, which saw its valuation double to $22 billion after a $1 billion funding round, has backed a new lobbying group called Americans for Fair Markets. The organization tapped former Deputy White House Chief of Staff Taylor Budowich as its strategic adviser and aims to shape federal policy on prediction markets, according to a statement Friday. A separate advocacy group, the Coalition for Prediction Markets, launched in December with backing from Coinbase, Crypto.com and Robinhood.
Trump's family has direct financial ties to the sector. His son, Donald Trump Jr., serves as an adviser to both Kalshi and Polymarket. Gemini, the crypto exchange founded by Trump supporters Cameron and Tyler Winklevoss, launched its own prediction market platform last week and filed to self-certify parlay-type contracts.
The New York Times reported over the weekend that the CFTC under former Acting Chairman Caroline Pham sidelined officials who raised concerns about approving crypto companies with ties to Trump's family businesses for designated contract market approvals. Neither the CFTC nor Moonpay, where Pham now works, responded to requests for comment.
The regulatory clash extends beyond U.S. borders. Spain's gambling regulator initiated disciplinary proceedings against Polymarket and Kalshi, ordering internet service providers to block access for operating without required licenses. India's crackdown has already forced Polymarket to go dark in the country, with Kalshi expected to follow.
The outcome of the federal-state jurisdictional fight will determine whether prediction markets operate under CFTC oversight with consumer protections including know-your-customer requirements and insider trading bans, or face state-level prohibitions that could fragment the market across 50 separate regulatory regimes. A Supreme Court decision on the matter could come as early as the next term.
This article is for informational purposes only and does not constitute investment advice.
