At a moment when prediction markets have moved from curiosity to cultural force, a 36-year-old federal regulator is attempting something ambitious: to make the United States the world's legitimate home for markets that let ordinary people bet on the shape of the future. Michael Selig, chairman of the Commodity Futures Trading Commission, is navigating the familiar tension between innovation and accountability — racing to write rules clear enough to keep these markets onshore before the absence of rules drives them permanently into the shadows. The question he is really asking is an old one: wh
CFTC Chief Vows to Make U.S. Prediction Markets Hub While Policing Insider Trading
If we don't take leadership there, we're going to see these markets flourish offshore.
Mark
So Selig is essentially saying that if we regulate prediction markets clearly here, they'll stay in America instead of moving offshore. Is that actually how markets work?
Mimi
That's his argument, and he's using the music industry as his proof. Once iTunes and Spotify had clear legal status, people stopped using Napster. The idea is that traders prefer regulated platforms if the rules are transparent.
Luke
But music streaming and prediction markets aren't the same thing. With music, you're paying for a service. With prediction markets, you're trying to make money. If the rules are stricter here, won't the profit incentive just push people offshore anyway?
Mimi
That's the real tension. Kalshi operates domestically and requires ID verification and daily reporting to the CFTC. Polymarket operates offshore with anonymous crypto wallets. If you're trying to hide something, Polymarket is more attractive.
Mark
And that's where the insider trading risk comes in. Someone with inside information could theoretically bet on a discrete event without being traced.
Luke
Theoretically. But Hanson and DeNault both argue that insider trading in traditional stock markets is actually worse and mostly undetected. We don't have hard numbers comparing the two.
Mimi
Right. Selig's position is that the solution isn't to ban prediction markets but to build oversight infrastructure. Kalshi's small average trade size—under $100—makes it harder to profit from inside information without standing out.
Mark
But what about the offshore platforms? They have no such constraints.
Luke
And that's the real problem Selig is trying to solve. He can't regulate Polymarket directly, but he can make the domestic alternative so attractive that people choose it voluntarily.
Mimi
Which brings us back to the music industry analogy. It's a bet that transparency and clear rules will win out over anonymity and opacity.
Mark
Has that ever failed?
Luke
Not in the music case. But prediction markets are newer, and the stakes feel different. We're talking about elections, not playlists.
El Pulso
- Prediction markets exploded into public consciousness during the 2024 election, outperforming traditional polls — and now regulators are scrambling to catch up with an industry that grew faster than the rules meant to contain it.
- The CFTC is fighting on two fronts simultaneously: investigating insider trading and market manipulation while also suing three states that want to classify prediction markets as gambling under local law rather than federal financial regulation.
- A federal appeals court just handed Selig a significant victory, ruling that federal law governs these markets — but critics warn the proposed regulatory framework may be too permissive about the unique insider trading risks prediction markets create.
- Domestic platforms like Kalshi require government ID verification and report all trades to the CFTC daily, while offshore rivals like Polymarket operate with anonymous crypto wallets and zero oversight — a gap Selig argues makes the case for regulation, not prohibition.
- Selig is betting on the iTunes model: that once clear, fair rules exist, users and capital will migrate to legitimate domestic platforms, just as music listeners abandoned Napster once legal streaming became easy and accessible.
At a moment when prediction markets have moved from curiosity to cultural force, a 36-year-old federal regulator is attempting something ambitious: to make the United States the world's legitimate home for markets that let ordinary people bet on the shape of the future. Michael Selig, chairman of the Commodity Futures Trading Commission, is navigating the familiar tension between innovation and accountability — racing to write rules clear enough to keep these markets onshore before the absence of rules drives them permanently into the shadows. The question he is really asking is an old one: whether a society can govern a new form of human behavior without strangling it.
Michael Selig did not expect prediction markets to define his tenure as CFTC chairman. At 36, he arrived in Washington in late 2025 braced for cryptocurrency battles — and instead found himself at the center of a fast-moving debate over platforms where people wager on elections, award ceremonies, and commodity prices. His central conviction is straightforward: if the United States fails to regulate these markets clearly, they will flourish offshore, beyond American law and American oversight.
The 2024 election made the stakes vivid. Platforms like Kalshi and the offshore Polymarket had forecast a decisive Trump victory at a time when major polls called the race close. The markets were right, and Washington began asking uncomfortable questions about whether people with inside knowledge had profited. The CFTC is now investigating trading activity around major events, including unusual patterns detected around the Academy Awards. Meanwhile, Selig's agency filed suit against Illinois, Arizona, and Connecticut, arguing those states are attempting to override federal jurisdiction by treating prediction markets as gambling. A federal appeals court ruled this week in the CFTC's favor.
Selig's regulatory blueprint has already attracted more than a thousand public comments. Certain contracts — those tied to assassination, terrorism, or deliberate injury in sports — would be prohibited outright. But his deeper concern is the cost of overreach. He argues the Biden administration made the same mistake the music industry once made, trying to ban behavior rather than channel it. The analogy he returns to is Napster: once iTunes offered a legal, convenient alternative, piracy collapsed. He expects the same dynamic to play out in prediction markets if the rules are clear and fair.
Not everyone is persuaded. Virginia Tech economist David Bieri contends that prediction markets are especially vulnerable to insider trading because they allow precise bets on single, discrete outcomes — a cleaner target than a stock price buffeted by countless variables. Selig's answer is that the problem is the lack of oversight, not the markets themselves. Kalshi verifies every user's identity and reports all trading to the CFTC daily. Offshore platforms accept anonymous crypto wallets from anywhere in the world, with no accountability.
Robin Hanson, the George Mason economist who first developed prediction market theory, dismisses the insider trading concern as a pretext. He notes that insider trading is far more prevalent in conventional stock markets, with substantial price movement routinely occurring before public announcements — dwarfing anything seen on prediction platforms. Kalshi's enforcement team makes a practical point: the average trade on their platform is well under a hundred dollars, making meaningful profit from inside information nearly impossible without triggering automatic alerts.
Hanson observes that this argument is not new — insurance, futures, options, and stocks were all condemned as gambling when they first appeared. Selig is wagering that honest rules and domestic accountability will vindicate prediction markets the same way they eventually vindicated every prior financial innovation.
Michael Selig, the 36-year-old chairman of the Commodity Futures Trading Commission, arrived at his job expecting to spend his tenure wrestling with cryptocurrency. Instead, he found himself confronting an industry that barely existed at scale a few years ago: prediction markets, where people bet on everything from election outcomes to Oscar winners to oil prices. Now, sitting in CFTC headquarters in Washington, Selig is trying to solve a problem nobody anticipated would arrive with such force—how to keep these markets American, regulated, and honest.
When Selig was sworn in on December 22, 2025, prediction markets were already drawing attention. During the 2024 election, platforms like Kalshi and the offshore rival Polymarket had forecasted a Trump landslide at a moment when major polls suggested the race remained competitive. The markets had proven prescient, and now Washington was scrambling to figure out whether the rules were adequate to prevent people with inside knowledge from cashing in. "I want the United States to be the markets capital of the world," Selig told me. "Whether it's prediction markets, crypto, traditional markets—if we don't take leadership there, we're going to see these markets flourish offshore."
The challenge is real. Selig's agency is investigating various participants on a daily basis and working with exchanges that have already brought actions against traders for insider trading and manipulation. Last month, following the Academy Awards, reports surfaced suggesting that some betting on the ceremony may have involved an inside track. When the CFTC sees unusual trading activity ahead of major events, Selig said, it takes action. But the bigger fight has been with states. The CFTC filed suit last week against Illinois, Arizona, and Connecticut, which Selig argues are "effectively trying to nullify federal law" by treating prediction markets as gambling products under state jurisdiction. A significant legal victory came this week when a judge in the Third Circuit Court of Appeals ruled that federal law, not state gaming statutes, governs these markets.
The regulatory framework Selig is building has already drawn more than 1,000 comments after the CFTC issued an advanced notice of proposed rulemaking last month. Some red lines are obvious: contracts tied to assassination, terrorism, or unsportsmanlike conduct would be flagged. So would injury contracts where a sports player might try to harm another player. But Selig is clear-eyed about the cost of overregulation. The Biden administration, he said, "drove many of these markets offshore" through regulation by enforcement, attempting to ban contracts outright rather than setting clear guidelines. He points to the music industry as a model. "Once you had clear rules of the road in the United States, once there was a reason to use the more well-regulated and legal platform, everyone started doing that," he said. "No one's using Napster or BitTorrent to get their music anymore. They're on iTunes or Spotify—and we expect to see the same with prediction markets."
The skeptics are unconvinced. David Bieri, an economist at Virginia Tech, argues that prediction markets make insider trading uniquely easy because they allow you to bet on a single, discrete event. If you have inside information about a stock, he told me, there are countless variables that can affect its price—but a prediction market offers a cleaner target. Selig's response is that the problem is not the markets themselves but the inability to oversee them in the United States. Kalshi, a domestic platform, requires every user to upload a government-issued ID and submit to identity verification. All trading activity is reported to the CFTC daily. Polymarket and other offshore exchanges have no such oversight, meaning anonymous crypto wallets with money from anywhere in the world can potentially sway public perception in an election.
Robin Hanson, the George Mason economist who pioneered prediction market theory, sees the insider trading argument as a smokescreen. "People don't like prediction markets and decided that highlighting possible insider trading is the approach to take to undermine them," he told me. He points out that insider trading is far more rampant in ordinary markets, with a significant amount of stock price movement happening before public announcements—movement he attributes to insider trading that is vastly larger than what gets caught. Kalshi's head of enforcement, Bobby DeNault, makes a similar point: the average retail trade on Kalshi is well under $100, making it hard to profit meaningfully from inside information without triggering automatic flags. "Any trading activity that's abnormally large is going to stand out," he said. "We don't have anybody making those kinds of profits in our market."
Hanson notes this is the same debate that surfaces after every financial innovation, whether insurance, commodity futures, options, or stocks. "Almost all financial markets were illegal initially because they were seen as gambling." Selig is betting that clear rules and domestic oversight will prove the skeptics wrong—and that American prediction markets, properly regulated, will thrive where offshore alternatives now flourish in the shadows.
Citas Notables
I want the United States to be the markets capital of the world. Whether it's prediction markets, crypto, traditional markets—if we don't take leadership there, we're going to see these markets flourish offshore.— Michael Selig, CFTC chairman
People don't like prediction markets and decided that highlighting possible insider trading is the approach to take to undermine them. Insider trading is far more rampant in ordinary markets, and the vast majority of it is never caught.— Robin Hanson, George Mason economist
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