Prediction Markets Trigger Federal-State Clash as CFTC Defends Authority

The CFTC is escalating its defense of exclusive authority over U.S. commodity derivatives and prediction markets as legal battles threaten to redraw regulatory lines and restrict access to event contracts nationwide.

Prediction Markets Challenge State Authority as Appeals Court Weighs Federal Derivatives Control

Prediction markets are at the center of a growing legal dispute over regulatory authority. The Commodity Futures Trading Commission (CFTC) filed an amicus brief on Feb. 17 in the U.S. Circuit Court of Appeals for the Ninth Circuit, affirming its exclusive jurisdiction over U.S. commodity derivatives markets, including event contract markets commonly known as prediction markets.

“CFTC-registered exchanges have faced an onslaught of lawsuits seeking to limit Americans’ access to event contracts and undermine the CFTC’s sole regulatory jurisdiction over prediction markets. This power grab ignores the law and decades of precedent,” CFTC Chairman Michael S. Selig stated. “Event contracts allow businesses and individuals to hedge event-driven risks, enable investors to manage portfolio exposure, and provide the public with information about the outcome of future events. These products are commodity derivatives and squarely within the CFTC’s regulatory remit.” Selig emphasized:

“As I’ve said before, the CFTC has the expertise and responsibility to defend its exclusive jurisdiction over commodity derivatives, and that’s exactly what we’ll do.”

Separately, Selig shared on social media platform X: “Chris Christie is leading a campaign to ban American Prediction Markets in states across the country. We’re simply not going to allow that to happen.” Christie is a politician and attorney who served as governor of New Jersey and ran twice for the U.S. presidency, most recently emerging as a prominent critic of President Donald Trump.

Selig also posted:

“The CFTC will defend its authority and ensure that prediction markets are built in America, not in China or Russia or anywhere else offshore where information can be polluted and manipulated. Thanks to POTUS, we’re ensuring that the US remains the crypto capital of the world.”

The filing was submitted in North American Derivatives Exchange, Inc. et al. v. The State of Nevada on relation of the Nevada Gaming Control Board et al. In its brief, the agency details the statutory and judicial foundations of its authority over commodity derivatives, arguing that courts and Congress have repeatedly affirmed its role, while states and other federal entities lack power to regulate markets under its exclusive oversight.

The CFTC first formally recognized event contracts in 1992 with approval of the Iowa Electronic Markets at the University of Iowa. Following the 2008 financial crisis, Congress granted the commission broad authority over contracts based on commodities, as defined under the Commodity Exchange Act, reinforcing its mandate to accommodate financial innovation within regulated markets.

FAQ ⏰

• Why did the CFTC file an amicus brief in the Ninth Circuit?

To affirm its exclusive jurisdiction over U.S. commodity derivatives markets, including prediction markets.

• What are event contracts according to the CFTC?

They are commodity derivatives that allow hedging of event-driven risks and portfolio exposure management.

• What case is at the center of the CFTC’s legal defense?

The filing was submitted in North American Derivatives Exchange, Inc. et al. v. The State of Nevada on relation of the Nevada Gaming Control Board et al.

• How did Congress expand the CFTC’s authority after 2008?

Congress granted broad authority over commodity-based contracts under the Commodity Exchange Act.