The Trump administration supports Calcci and BulliMarket as states move to ban prediction markets

NEW YORK (AP) — The Trump administration is offering its support to prediction market operators Kalshi and Polymarket in a crucial legal battle between the growing prediction market industry and states that want to ban these platforms.

The move by Michael Selig, the recently appointed chairman of the Commodity Futures Trading Commission, could have huge implications for how sports betting is regulated in the country, and if Calcci and PollyMarket prevail, it could erode states’ ability to effectively regulate gambling.

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Any friendly decision the CFTC makes regarding the industry may end up benefiting the president’s family financially as well. President Trump’s son, Donald Trump Jr., has invested in Polymarket through his venture capital firm and is a strategic advisor to Kalshi.

The CFTC currently regulates prediction markets, and federal oversight allows Calci and others to operate in all 50 states, even those where gambling is illegal. Several states have sued Polymarket and Kalshi, alleging that the two companies effectively run casino or gambling operations in violation of state gambling laws, and ordering them to close or cease operating in their states.

In an opinion piece in the Wall Street Journal, Selig wrote: “The CFTC will no longer stand idly by while overzealous state governments undermine the agency’s exclusive jurisdiction over these markets by seeking statewide bans on these exciting products.”

Polymarket, Kalshi, and other prediction markets allow participants to buy and sell contracts linked to the likely outcome of an event. Customers can bet on everything from whether it will rain in Los Angeles tomorrow to who will participate in the NBA Championship to whether the United States and Iran will go to war. Contracts are typically priced between 1 cent and 99 cents, which roughly translates to the percentage of those clients who believe this event will occur.

While customers can bet on anything, nearly 90% of Kalshi’s trading volume goes to betting on sports, while nearly half of Polymarket’s trading is sports-related. Calci said it saw trading volume of more than $1 billion at the Superbowl.

The largest lawsuits come from Nevada, where the Nevada Gaming Control Board has sued or issued enforcement actions against Calci and PoleMarket, saying they ran unlicensed sports betting operations in the state. A federal judge agreed with the NGCB and issued a temporary restraining order against Kalshi from working in the state.

In response, Calci appealed the case to the U.S. Court of Appeals for the Ninth Circuit, which is why the CFTC is considering what is known as a “friend of the court” brief.

As the regulator of commodities, futures and derivatives, the CFTC has historically overseen markets such as oil futures, agricultural products, gold and other financial products. The CFTC has about 700 employees, which is much smaller than the SEC, which has approximately 5,000 employees. But as the CFTC has become the regulator of choice for cryptocurrency companies and proponents of prediction markets, it has taken on a much larger role in the financial markets in the past five years.

By intervening in the lawsuit, the Trump administration is taking an unusually broad definition of commodities and futures. Selig has changed his position from what he told senators at his confirmation hearing, where he said it would be better for the CFTC to take to the courts the underlying legal issue facing Calci and Polymarket.

Last week, Selig announced that the regulator would create an “Innovation Advisory Committee” to help the CFTC draft regulations on issues like cryptocurrencies and prediction markets. The 35-member panel includes the CEOs of Polymarket, Kalshi, Coinbase, Robinhood, FanDuel, and DraftKings. While there is some representation from traditional finance, the committee has no representation from consumer advocates or public interest groups.

Selig says now that prediction markets are effectively doing the same thing as other futures contracts, where customers can hedge against bad weather or changes in energy prices, and not bet against the house, which is what happens with sportsbook companies. The states that have taken legal action against Kalshi and Polymarket say that although these companies offer customers the ability to bet on future events, the vast majority of their business is sports betting. Furthermore, most prediction markets allow customers aged 18 or older to use their platforms, while state gambling is restricted to those aged 21 or older.

Selig now says states can’t get ahead of federal regulators.

“To those who seek to challenge our authority in this area, let me be clear, we will see you in court,” Selig said in a video statement.

Some GOP members rejected Selig’s announcement, including the governor of Utah, which has some of the strictest gambling laws in the country.

“Mike, I appreciate you trying to do this with a straight face, but I don’t recall the CFTC having jurisdiction over the ‘derivatives market’ for LeBron James bounces,” Gov. Spencer Cox said in a statement on Twitter. “These prediction markets that you defend so relentlessly are a gamble – plain and simple.”