Congress Committee Debates CFTC Role With Prediction Markets

The battle over sports prediction markets is expanding to a new front.

The US House Committee on Agriculture, which oversees the Commodity Futures Trading Commission, met this week to discuss reauthorizing the regulator. During the hearing, the committee invited several former CFTC members and stakeholders to share their thoughts on prediction markets. They discussed funding, manpower, and the dangers posed by rapid expansion.

While several topics were covered during the hearing, prediction markets were one of the committee’s main focuses. 

Lawmakers asked questions about the legal status of the controversial new industry, which is classified as commodity trading rather than gambling. The issue has been a heated source of debate over the last year, with several lawsuits currently under review across the US.

Another key insight during the hearing came from former CFTC General Counsel Rob Schwartz. He voiced concerns over the regulator’s ability to handle the industry, given its inexperience and lack of workforce. He also shared his belief that event contracts offered by these operators are a form of gambling. 

You can go on sites like Kalshi and Polymarket and essentially put a bet on either of the teams, and if the team that you put a bet on wins, you get money. That’s gambling. That’s sports betting. And the CFTC really has no expertise or authority in that area.” Schwartz shared during the hearing.

CFTC Leadership Could Change Debate

While the CFTC is currently understaffed and without a leader, it seems likely White House nominee Michael Selig will be approved to take over the regulator. 

His reputation as a warrior for the crypto industry has led many to believe he will protect prediction markets, but he has refused to confirm his support. Instead, he told lawmakers he would follow rulings from the US court system, which is currently hearing a slew of lawsuits over the industry.

Opponents of Selig believe his deference to the courts is not only misleading but also prevents the regulator from ruling on a crucial issue. They believe the CFTC's refusal to make rulings will allow the industry to continue, despite the legal rulings that are handed down.