CFTC Chairman Mike Selig Signals Imminent Guidance On Prediction Markets Amid State Pushback, Iran Trades
CFTC Chairman Mike Selig used his appearance at the Milken Institute "Future of Finance" panel Tuesday to send a clear message: the federal government is not backing down from asserting jurisdiction over prediction markets — and formal guidance is coming soon.
The headline: the CFTC plans to issue near-term guidance clarifying what event contracts can be self-certified and how those products will be evaluated, followed by an advanced notice of proposed rulemaking that could further formalize the framework.
That announcement lands at a sensitive moment for the industry — particularly as states like Nevada, Massachusetts, New Jersey and Maryland challenge those platforms to offer sports-events trades. And Kalshi and Polymarket (which has yet to receive DCM certification in the U.S.) face fierce public backlash concerning trades related to the U.S. and Israel strike on Iran.
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Federal vs. State: The Core Jurisdiction Fight
Selig defended the CFTC’s amicus brief filed in Nevada litigation, where the agency asserted its federal authority over event contracts offered by federally regulated exchanges.
Selig reiterated his public statements that event contracts fall squarely under the agency’s long-standing derivatives authority — authority that dates back to the 1970s and was broadened under Dodd-Frank to include swaps and certain event-based futures.
His position:
- Event contracts are derivatives.
- Derivatives are federally regulated.
- The U.S. cannot operate under “50 different regimes” for federally listed products.
That argument cuts directly against state regulators — particularly in Nevada — who contend that sports-linked event contracts resemble sports betting and should therefore fall under state gaming control.
The tension is clear:
State-regulated sportsbooks operate under gambling frameworks.
CFTC-regulated exchanges operate under derivatives law.
Selig stressed that the two systems can exist in parallel, but the CFTC will assert authority where it believes states are overreaching into federally regulated territory.
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Prediction Markets “Not New” — But They’re Expanding
Selig pushed back on the idea that prediction markets are a recent innovation, citing early academic markets like the Iowa Electronic Markets and exchanges such as NADEX.
His broader defense:
- These markets are fully regulated futures exchanges.
- They involve clearinghouses, capital requirements, broker oversight, and marketing restrictions.
- They are subject to a comprehensive federal risk framework.
He contrasted that with state gaming regimes, which operate under a very different regulatory philosophy.
In Selig’s framing, prediction markets resemble federally regulated pharmaceuticals, while state gambling resembles supplements — both legal, but governed under different oversight structures.
Maloney: 'Abusive' Trades Happened On Markets Outside U.S.
Speaking at the same event, Sean Patrick Maloney, President and CEO, Coalition for Prediction Markets and former US Representative, New York, raised those concerns about government officials possibly making "insider" trades on the Iran strikes.
"It's very important to highlight the difference between U.S. based, federally regulated, entities that already ban insider trading, that have know your customer rules, that have anti-fraud and money laundering protections, that are used to existing in a comprehensive system of U.S. based law and regulation," Maloney said.
"There's probably room for some folks on Capitol Hill to do some legislating in this area. I think it would make some sense to clarify for the American people that senior government officials aren't gonna be profiting from their role, either members of Congress or members of the administration, and making sure there's some teeth in that, and people can have some confidence in that. Even though most of the reports you've seen are abusive, you've seen, haven't happened the U.S. based exchanges, right? They've happened at offshore platforms," Maloney added.
When it comes to the Iran trades, Maloney said prediction markets can be used as another tool for intelligence gathering. Again, he drew the line between U.S.-regulated platforms and those operated overseas.
"To me, it really underscores the need for policymakers not to drive people to offshore platforms. And the chairman of the CFTC made this point this morning. If you want them in China or Russia, you know, ban them here." Maloney said.
Robinhood Vice President and GM of Prediction Markets J.B. Mackenzie said.
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The Kalshi Iran Blowback
The Chairman’s comments also come amid controversy surrounding Kalshi, which recently faced intense criticism over a market involving Iran’s Supreme Leader.
The market drew backlash from politicians and members of the public who argued that geopolitical “death” contracts cross ethical lines. Kalshi CEO Tarek Mansour took to X twice to clarify that:
- The rules were not changed.
- A “death carveout” was disclosed in advance.
- The exchange resolves markets strictly according to published rules.
The episode amplified scrutiny of what types of event contracts should be permitted — especially when they involve war, foreign leaders, or assassination scenarios.
Selig did not directly reference Kalshi’s Iran market in the panel discussion, but his promise of forthcoming guidance strongly suggests the CFTC recognizes the need for clearer guardrails around certification standards.
Maloney did. He said Kalshi's contract on a leadership change in Iran "was incredibly important" and an "event that many, many people want to hedge against. There is nothing in the world wrong with that."
He added Kalshi unwound the contract, took millions of dollars in losses as a result, and apologized.
"Could they have been more clear in communicating that ahead of time? The CEO said, You bet, and they've pledged to do so. Contrast that with how an offshore platform behaves, and they act as though nothing's gone wrong," Maloney said.
Sports Betting Implications
For the sports betting industry, the stakes are enormous.
Since the fall of PASPA in 2018, sports betting has been regulated state-by-state. Operators like Fanatics, DraftKings, and FanDuel operate under gaming licenses, pay state taxes, and comply with local consumer protection rules. But they also operated prediction market platforms. And they offer sports-related trades in states where they do not allow sports betting.
Both DraftKings and FanDuel touted their prediction market platforms in their most-recent earnings calls and investor days.
Prediction markets introduce a competing framework:
- Federally regulated
- Potentially available nationwide
- Structured as exchange-based derivatives
- Not subject to state gaming taxes
That distinction has fueled litigation in multiple states, including Nevada, where regulators have sought to block certain sports-linked contracts.
Selig’s core argument: if these products qualify as derivatives under federal law, they cannot be carved up state by state.
But the political optics are tricky. When event contracts begin to resemble traditional moneyline or spread betting — or when they touch geopolitical flashpoints — state regulators and lawmakers push back hard.
What’s Coming Next
Selig outlined a two-step regulatory roadmap:
- Near-term guidance clarifying what can and cannot be self-certified.
- An advanced notice of proposed rulemaking, laying groundwork for more comprehensive regulation.
That suggests the CFTC may:
- Tighten standards for sensitive geopolitical markets.
- Clarify boundaries around sports-linked contracts.
- Formalize how exchanges evaluate new listings.
The underlying message from Selig: better to regulate these markets in the United States than drive them offshore.
He warned that attempts to block prediction markets outright could mirror what happened with crypto — pushing innovation abroad while weakening U.S. oversight.
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The Bigger Picture
The debate is no longer just about sports.
It’s about:
- Federal vs. state authority
- Gambling law vs. derivatives law
- Free markets vs. political sensitivities
- Domestic oversight vs. offshore migration
With guidance imminent, the CFTC is signaling that prediction markets aren’t going away — but the rules around them may soon become much clearer.
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