The ongoing struggle over who should oversee prediction markets in the United States has escalated sharply, with the Commodity Futures Trading Commission (CFTC) moving a key proposed rule to the White House for review. This development comes amid a fierce tug-of-war between federal and state authorities vying for control over this rapidly expanding sector. The proposal, which aims to establish the first comprehensive federal framework for event contracts, is now under scrutiny by the Office of Management and Budget before it can be opened for public commentary. Although the specific details remain undisclosed, the rule is expected to address critical issues such as insider trading, prohibited contracts, market safeguards, and the legal standing of event-based trading platforms.
Platforms like Kalshi and Polymarket could face significant operational shifts if the rule is enacted, as it would impose uniform federal standards on event contracts. The core of the dispute revolves around whether these contracts—linked to elections, sports, and other public events—should be classified as regulated derivatives under federal law or as gambling activities subject to state regulation. Several states, including Nevada, New Jersey, Illinois, and Montana, have already taken enforcement actions against prediction market operators, arguing that certain contracts resemble sports betting and must comply with local gaming laws. In response, companies like Kalshi contend that their offerings are permissible under the Commodity Exchange Act, a position that state regulators have repeatedly challenged.
President Donald Trump entered the fray by publicly endorsing the CFTC’s exclusive authority over prediction markets, calling the matter critically important for establishing clear national guidelines. His statement drew sharp criticism from Illinois Governor JB Pritzker, who defended his state’s proactive measures to curb insider trading in online prediction markets. Pritzker accused Trump of attempting to block state-level oversight to benefit allies, pointing to ties between Trump’s son, Donald Trump Jr., and prediction market firms. Trump Jr. holds investments in Polymarket through his venture capital firm and serves as a strategic adviser to Kalshi, raising concerns over potential conflicts of interest. The legal landscape remains fragmented, with courts divided on whether CFTC jurisdiction preempts state gaming authority, a question that could ultimately shape the future of prediction markets in the United States.