Senators urge top regulators to stay away from lawsuits related to prediction market

A group of Twenty-three Democratic US senators sent a letter on Friday to the top federal regulator overseeing prediction markets, urging the agency to avoid weighing in on pending court cases over the legality of offers on platforms linked to “sports, war and other prohibited events.”

Prediction markets, which sell contracts tied to the outcomes of real-world developments, have boomed in popularity over the past year, attracting a growing fan base eager to bet on everything from geopolitical conflicts to fashion choices to the Super Bowl. As they expand, these platforms have become a magnet for ethical and legal controversy. On Thursday, for example, Israeli authorities announced the arrest of two people on suspicion of using classified military information to bet against Polymarket, one of the largest companies in the industry.

The senators’ letter reflects a growing divide over how to deal with Polymarket and competitors like Kalshi. The US government currently considers prediction markets to be derivative markets, which means they fall under the jurisdiction of the Commodity Futures Trading Commission. But state authorities, who have emerged as the industry’s harshest critics, argue that platforms should be subject to the same local regulations as gambling products.

There are at least 19 ongoing federal lawsuits challenging Calci’s legality, according to an analysis by NPR. In one case in Massachusetts, a judge blocked the company from offering sports contracts after the state sued it for operating without a gambling license. Polymarket then filed a countersuit against the state of Massachusetts, arguing that state regulators had no authority over its business.

In his first public comments about prediction markets since taking office in December, CFTC Chairman Michael Selig signaled that the agency may pick up the fight, noting that it has the “experience and responsibility to defend its exclusive jurisdiction.”

Now, a cadre of senators led by Adam Schiff of California is urging the CFTC to stay out of lawsuits in the state. Their letter also asks the agency to prohibit prediction markets from offering gaming contracts, as well as contracts that involve “war, terrorism, assassination, or other activities mentioned.” Signatories include Cory Booker, Amy Klobuchar, and Ron Wyden.

Taylor Foy, CTFC’s head of public affairs, says the letter is a “gross mischaracterization” of Selig’s stated positions on prediction markets. “Chairman Selig has clearly said that while complex interpretive questions about the classification of certain products may be best left to the courts to sort out, he has always stood by the CFTC’s exclusive authority to regulate the market for those products, as it has for more than two decades,” Foy said in an emailed statement to WIRED.

During the Biden administration, the CFTC attempted to place barriers on some aspects of prediction markets. In 2024, for example, the independent agency proposed banning the sale of some types of contracts, including those related to sports and politics.

But under the Trump administration, the CFTC has taken a radically different approach. After Selig took office in December, the CFTC quickly withdrew the ban proposal and created a new advisory board that includes the CEOs of all major prediction market companies. When former New Jersey Gov. Chris Christie suggested on social media this week that prediction markets were violating the law, Selig issued a terse response: “I strongly disagree.”

Speaking on Bloomberg’s Odd Lots podcast this week, Selig laid out his vision for regulating the industry, rejecting the idea that prediction markets should be viewed as the equivalent of sports gambling. “These aren’t bets, you’re not betting against the house,” he said. “We have a significant overlap from a regulatory standpoint around these markets. So we don’t monitor certain categories of markets or elections or sports by having different standards.”