SEC Chair Atkins Signals Regulatory Crackdown on $63.5B Prediction Market Boom

SEC Chair Paul Atkins told the Senate Banking Committee on February 12, 2026, that prediction markets are a “huge issue” requiring potential joint oversight with the CFTC. The $63.5 billion sector—dominated by Kalshi and Polymarket—has quadrupled in size since the 2024 election cycle, triggering federal jurisdiction questions and state lawsuits over unlicensed sports betting.

Atkins asserted the SEC already has “enough authority” to act without new legislation, marking the first major signal that the agency may extend its securities framework into event contracts. The comments come as both agencies launch “Project Crypto” and face internal leadership gaps ahead of anticipated congressional crypto legislation.

Prediction Markets Enter the SEC’s Crosshairs

For the past two years, prediction markets have operated in a regulatory gray zone—too big for state regulators to ignore, yet too novel for federal agencies to confidently categorize. That ambiguity ended on Thursday.

SEC Chair Paul Atkins, testifying before the Senate Banking Committee, delivered a clear message: prediction markets are no longer a CFTC-only affair. When asked by Sen. Dave McCormick whether the SEC would need new legislative authority to regulate the booming sector, Atkins responded with two words that sent ripples through the industry.

“I think we have enough authority.”

The comment was brief, deliberate, and strategically timed. Prediction markets have exploded from a niche curiosity into a $63.5 billion global industry in less than two years, according to security researchers at Certik. Platforms like Kalshi and Polymarket now command valuations of $11 billion and $9 billion respectively. They survived CFTC scrutiny, state gambling lawsuits, and insider trading allegations. What they did not anticipate was the SEC deciding the ticket to bet on a Super Bowl might also be a security.

What Are Prediction Markets? A Sector Grown Too Fast to Ignore

Prediction markets allow users to wager on the outcome of future events—elections, interest rate decisions, sports championships, even the box office performance of movies. Users buy contracts that pay out if a specific outcome occurs. If it does not, the contract expires worthless.

The model is not new. Political prediction markets have existed in academic and offshore forms for decades. What changed in 2024 was the combination of user-friendly interfaces, crypto-native settlement, and an election cycle that turned political speculation into a mainstream pastime.

Kalshi, the first CFTC-regulated prediction exchange to launch in the United States, opened for business in 2023. Polymarket, built on Ethereum, grew exponentially through the 2024 presidential race, attracting both retail traders and sophisticated macro funds using its odds as real-time sentiment indicators.

By early 2026, the sector had processed tens of billions in trading volume. But success invited scrutiny. State regulators, led by New Jersey and Nevada, filed lawsuits arguing that sports-related event contracts constitute illegal, unlicensed gambling. Federal oversight, meanwhile, rested almost entirely with the CFTC—an agency that under former Chair Rostin Behnam took a permissive approach to registration and self-regulation.

Atkins’s testimony suggests that era is ending.

SEC vs. CFTC: The Overlapping Jurisdiction Question

The jurisdictional line between securities and commodities has haunted crypto regulation for years. Under Behnam, the CFTC argued that most digital assets fell under its commodity umbrella. Under former SEC Chair Gary Gensler, the SEC claimed nearly every token except Bitcoin was a security. The result was paralysis, litigation, and the infamous “turf war.”

Atkins and CFTC Chair Michael Selig are attempting a different playbook. Both men have signaled a preference for cooperation over conflict. The two agencies now meet weekly and have jointly launched “Project Crypto,” an initiative aimed at modernizing digital asset rules.

But cooperation does not mean the SEC is ceding ground. Atkins explicitly identified prediction markets as “exactly one thing where there’s overlapping jurisdiction potentially.” He emphasized that “a security is a security regardless of how it is,” and that the classification of a prediction contract “depends on wording and what exactly is being done.”

Translation: if a contract tracks the price of an individual stock, or references an index composed of securities, or is structured to resemble an investment product rather than a pure wager, the SEC considers it inside its perimeter.

Key Data Points from the Prediction Market Surge

• Industry valuation: $63.5 billion (more than quadrupled in 2025)
• Kalshi valuation: Approximately $11 billion
• Polymarket valuation: Approximately $9 billion
• U.S. market entry: 2023 (Kalshi CFTC registration)
• Primary regulatory exposure to date: CFTC, with state gambling lawsuits pending
• SEC position as of Feb 12, 2026: Asserting existing authority; joint framework under discussion

The States Are Already Moving

Federal regulators are not the only ones closing in. Throughout 2025, a coalition of state attorneys general filed suit against Kalshi and other platforms, arguing that sports-related event contracts are indistinguishable from traditional sports betting—an activity strictly regulated (or prohibited) at the state level.

The platforms’ defense has been consistent: the Commodity Exchange Act grants the CFTC exclusive jurisdiction over derivatives, including event contracts. State gambling laws, they argue, are preempted when a product is federally regulated.

This argument has not yet been definitively tested in court. If the SEC now asserts concurrent jurisdiction over certain contracts, the preemption question becomes more complicated—and the platforms face the prospect of dual federal overseers plus hostile state regulators.

Who Is Paul Atkins? The SEC Chair Reshaping Crypto Policy

Atkins is not Gary Gensler. Where Gensler approached crypto with aggressive enforcement and maximalist jurisdictional claims, Atkins brings a background in market structure and a preference for regulatory clarity over litigation.

Appointed by President Donald Trump in 2025, Atkins previously served as an SEC commissioner from 2002 to 2008 and later co-founded Patomak Global Partners, a consultancy advising financial firms on compliance. He is viewed by industry advocates as a pragmatist—willing to assert authority where he believes it exists, but open to congressional frameworks that define boundaries.

His assertion that the SEC already possesses “enough authority” to regulate certain prediction markets is therefore not the statement of an activist regulator seeking to expand his domain. It is the statement of a conservative lawyer who has reviewed the Securities Act of 1933 and concluded that some event contracts, as currently written, likely meet the Howey test definition of an investment contract.

Whether that interpretation holds up to judicial review is another question. But Atkins has telegraphed his position clearly.

CFTC Chair Selig: “Don’t Push Them Offshore”

Selig, appearing on Bloomberg’s Odd Lots podcast the same day Atkins testified, struck a more conciliatory but equally determined tone.

“We are certainly taking on that task and making sure that we don’t let these markets languish, where we don’t push them offshore, but we develop the right rules and regulations to develop the best protections and make sure that the markets are flourishing here in the United States,” Selig said.

The comment reveals a shared anxiety. If U.S. regulators overreach—or create overlapping, contradictory requirements—prediction market platforms will migrate to jurisdictions with clearer, lighter-touch regimes. Bermuda, Gibraltar, and Singapore are already competing for this business.

Selig’s challenge is to design a regulatory framework robust enough to satisfy both the SEC and state gambling authorities, yet permissive enough to keep the industry onshore. It is a narrow path, and it runs directly through the jurisdictional dispute Atkins identified.

The Empty Seats Problem at SEC and CFTC

Beneath the policy questions lies a structural weakness. Both the SEC and CFTC are statutorily designed to have five commissioners, with no more than three from the same political party. Bipartisan leadership is baked into their governing model.

Currently, the CFTC has exactly one commissioner: Chair Selig. The SEC has three commissioners—Atkins, Hester Peirce, and Mark Uyeda—all Republicans. There are no Democratic commissioners at either agency.

During Thursday’s hearing, Sen. Chris Van Hollen pressed Atkins on whether he would urge the White House to fill the Democratic vacancies. Atkins responded that he has been “in public and in private, supportive of having a full complement of commissioners” and believes that diverse viewpoints strengthen debate and decision-making.

The vacancies matter because major rulemakings—particularly those involving novel jurisdictional assertions—benefit from bipartisan buy-in. A divided SEC with empty Democratic seats can act, but its actions are more vulnerable to legal challenge and political reversal.

Trump has not yet nominated candidates for the vacant positions. Until he does, both agencies operate at less than full strength, navigating the most significant expansion of their respective mandates in a generation with depleted benches.

What Comes Next for Kalshi, Polymarket, and the Industry

The immediate future of prediction markets in the United States depends on three variables.

First, whether the SEC translates Atkins’s testimony into formal rulemaking or enforcement actions. A single well-chosen case—perhaps a contract tracking Tesla’s stock price—could establish precedent without requiring a wholesale regulatory overhaul.

Second, how the CFTC responds. Selig has committed to updating the agency’s approach to event contracts, which have historically been restricted through a series of no-action letters and interpretive guidance. Formal rulemaking would provide predictability but also invite political and legal pushback.

Third, the fate of pending state litigation. If courts rule that state gambling laws are preempted by CFTC jurisdiction, the platforms gain breathing room. If courts side with state attorneys general, the entire business model faces fragmentation.

What is no longer possible is the status quo. A $63.5 billion industry that barely existed two years ago cannot remain beneath the regulatory radar. Atkins and Selig have made clear that radar is now actively scanning.

Four Takeaways from Atkins’s Prediction Market Signal

The SEC is ready to move without Congress. Atkins’s assertion of existing authority means legislation is not a prerequisite for enforcement or rulemaking.

The security/commodity divide now applies to event contracts. The same classification battles that defined the crypto enforcement era are migrating to prediction markets.

State regulators are forcing federal action. The lawsuits from Nevada, New Jersey, and others have accelerated Washington’s response.

Bipartisan capacity is strained. Empty Democratic seats at both agencies create institutional fragility at a moment of major policy expansion.

Atkins’s testimony did not resolve the regulatory status of prediction markets. It did something more consequential: it confirmed that the question is now active, urgent, and shared between agencies that spent the past five years fighting over who gets to say no. The era of benign neglect is over. What replaces it will determine whether the $63.5 billion prediction industry remains American or becomes another offshore export.