The Commodity Futures Trading Commission (CFTC) has endured controversy for allowing sports prediction markets to operate across the US throughout the last year.
Platforms like Kalshi and Polymarket – each overseen by the CFTC – began offering sports-based event markets in 2025, entering states where traditional sports betting is illegal.
States responded through cease-and-desist orders and, more recently, litigation, to force prediction operators out of their jurisdictions. Meanwhile, sports trading exchanges argue that CFTC regulation preempts state laws, preventing state-issued interventions.
Amidst this furore, the CFTC has mostly stood silent.
Until new Chair Michael Selig took the floor at an 'Unleashing Innovation' conference, recently, that is.
Selig: New sports trading rules to replace proposed ban
Michael Selig was appointed as CFTC Chair in December 2025, replacing acting Chair Caroline Pham.
His speech at the CFTC-SEC conference on January 29, 2026, presented an opportunity to set out a clear message on the organization's sports trading stance.
Speaking at the podium, Selig outlined plans to unwind unfinalized 2024 proposals that sought to ban sports exchange trading.
If those rules had been enacted, prediction market operators would have been prohibited from offering sports and politics contracts where users may buy 'yes' or 'no' shares tied to a specific outcome.
Further, Selig announced that the CFTC will remove a 2025 staff advisory letter written to warn operators against supplying sports trading services due to uncertain legal boundaries.
Explaining his decision, Selig said: "While the advisory was issued at the staff level with the intent of bringing awareness to the litigation, it has instead contributed to uncertainty in our markets."
On that point, Selig is referring to defendants in anti-prediction lawsuits being hindered by opposing groups leveraging internal CFTC guidance as evidence for wrongdoing. This removal seeks to remedy such circumstances.
Selig has also directed CFTC officials to develop new rules for sports trading – citing difficulties in applying existing protocols:
"For too long, the CFTC's existing framework has proven difficult to apply and has failed our market participants. That is something I intend to fix by establishing clear standards for event contracts that provide certainty to market participants."
The CFTC has thus far employed a self-certification process, allowing operators to publish new markets and facilities without direct authorization. Only if the federal body pushes back on a submission can a fresh product be prevented from going live.
According to Selig, this liberal framework has been and remains incompatible with CFTC standards.
His proposition is a new, direct structure detailing permissible and barred products and services.
However, suggestions that this approach may induce sports trading restraints may be misplaced. What is more likely is a defined, albeit open, rules shortlist.
Expect greater CFTC involvement in legal proceedings
Selig's next point on sports prediction trading stands as the most striking, and likely the most impactful:
"I have directed CFTC staff to reassess the Commission's participation in matters currently pending before the federal district and circuit courts.
"Where jurisdictional questions are at issue, the Commission has the expertise and responsibility to defend its exclusive jurisdiction over commodity derivatives."
The federal body has previously veered away from legislative discourse, debate and disagreement. Now, it is anticipated that the CFTC might actively engage in legal conflict across states involving prediction platforms.
For operators, this could herald greater support from the very body they often source during legal proceedings; prediction platforms consistently declare that only the CFTC holds jurisdiction over derivative options, not individual states.
Should the CFTC participate in existing and future litigation, it would mark a new dawn for an already fierce battleground.
Part of Selig's CFTC reformation efforts involves the Securities and Exchange Commission (SEC), which oversees federal securities:
"I have directed CFTC staff to work with our counterparts at the SEC to develop a joint interpretation on Title VII definitions. This effort would draw clearer lines between certain commodity and security options, CFTC-regulated swaps, and SEC-regulated security-based swaps."
Put simply, the CFTC and SEC will convene to coordinate precise definitions for certain types of trading.
The goal is to produce a transparent foundation for the future, where operators and regulators immediately understand which entity is responsible for regulating different products and services.
Why regulatory clarity matters now
Predictions platforms threw a wrench in what had been a stalwart sports betting industry when Kalshi launched its sports derivatives leg in January 2025.
Polymarket, Fanatics and Crypto.com followed suit, offering a range of event contracts tailored to US sports over the following 12 months.
State gambling regulators took issue with prediction operators from the outset – issuing cease-and-desists to curb trading momentum and force withdrawals due to what they perceive as unlicensed, illegal sports betting.
But rather than just mitigating sports trading, the issuance of these orders initiated back-and-forth legal proceedings. This is dissimilar to what is seen in the online US sweepstakes space, where operators often depart states upon receiving legal letters.
A pivotal ruling in January 2026 saw a Massachusetts judge recognize the state's ability to enforce a preliminary injunction against Kalshi. Up to that point, prediction operators had successfully argued that only the CFTC is authorized to determine whether sports trading is legal.
That same month saw the Nevada Gaming Control Board target Polymarket – the operator had never previously faced domestic litigation. In turn, over 25 states signed an accord supporting the regulator's cause.
New York, New Jersey, Connecticut, Ohio and Maryland, among others, have also engaged in legal warfare against prediction platforms.
In Selig's speech, three core pillars intertwined with gambling regulator's legal challenges were addressed:
- The CFTC will remove ambiguity concerning sports trading guidance.
- It will confirm which products are permitted and strictly prohibited.
- CFTC members may support prediction operators during legal cases.
When Selig's revised messaging rolls into action, both sides must decide whether it is enough to persist simultaneously.
