CFTC's Selig offers prediction markets a deal they might hate to accept

Michael Selig, the chairman of the Commodity Futures Trading Commission, has decided to stop threatening prediction markets with extinction and start regulating them instead. In January 2026, he announced that the CFTC would abandon a 2024 proposal that would have effectively banned sports and politics prediction markets, and would withdraw a 2025 staff advisory that had warned platforms away from sports betting altogether. That advisory, Selig acknowledged, had only made things worse by deepening the legal uncertainty that already surrounded the sector. In its place, he ordered his staff to write new rules—a formal rulemaking process that would establish clear standards for what the CFTC calls event contracts, framing them not as mere gambling but as legitimate tools for hedging risk and aggregating information about future events.

The shift is significant, but it comes with strings. Selig has made clear that prediction markets fall squarely under federal jurisdiction through the Commodity Exchange Act, and that the CFTC—not individual states—will be the authority that oversees them. He has said publicly that the agency will "no longer remain passive" while states try to impose their own bans, and the CFTC has already asked a federal appeals court for permission to file a brief supporting a CFTC-registered exchange in Nevada, where the state has attempted to regulate event contracts as gambling. That fight could eventually reach the Supreme Court as a question of federal preemption.

But Selig's offer to the prediction market industry is not a blank check. He has repeatedly emphasized that exchanges must serve as the "first line of defense" against insider trading. The compliance burden he is signaling is real: platforms will need to tighten their controls around the use of material non-public information—the kind of edge that might let someone place a bet on a sports outcome knowing something the public does not. The Department of Justice is already watching. The U.S. Attorney for the Southern District of New York has publicly warned that "placing a bet through a prediction market doesn't insulate you from fraud," pointing to cases where bettors used inside information about a player's injury or availability to manipulate prop bets. That same logic, prosecutors have suggested, could apply to political markets, policy markets, or markets tied to wars and geopolitical events.

The prediction market question sits inside a larger federal push to bring crypto and digital assets under clearer rules. In the same speech where Selig announced his new stance on event contracts, he unveiled "Project Crypto," a formal coordination between the CFTC and the Securities and Exchange Commission aimed at delivering what he called "clear, durable rules of the road" for digital-asset markets. The two agencies will work together on a taxonomy of crypto assets and on expanding what kinds of tokenized collateral can be used in derivatives trading. Selig has also signaled that the CFTC is willing to own perpetual futures, tokenized stocks, and prediction markets—as long as they operate inside the federal regulatory perimeter, subject to what he calls "appropriate safeguards."

For prediction market platforms, the deal is this: you can operate legally under federal law, but you must accept CFTC oversight, upgrade your compliance infrastructure, and submit to enforcement action if you fail to police insider trading or fraud. For states that have tried to ban or restrict these markets, the message is that their authority is about to be challenged. For the crypto industry more broadly, it signals that Selig sees regulation not as a threat to innovation but as a prerequisite for it—a framework that allows novel products to scale, provided they meet federal standards. Whether platforms and investors find that trade-off acceptable remains to be seen.