- A House subcommittee examined how the CFTC can oversee prediction market platforms amid a staffing shortage
- Carl Kennedy testified the agency is “short-staffed” and needs additional resources to handle rapid growth in prediction markets
- The CLARITY Act under Senate consideration could grant the CFTC expanded authority over digital assets and prediction markets
- CFTC Chair Michael Selig’s unilateral claim of “exclusive jurisdiction” is creating conflict with state regulators
Lawmakers on the House Agriculture Committee’s Subcommittee on Commodity Markets, Digital Assets, and Rural Development held a hearing Tuesday examining how the Commodity Futures Trading Commission could address oversight of prediction market companies like Kalshi and Polymarket. Carl Kennedy, a partner at New York law firm Katten Muchin Rosenman, said the CFTC was likely too “short-staffed” to fully handle regulation and enforcement of these platforms.
The Digital Asset Market Clarity (CLARITY) Act under consideration in the Senate could grant the regulator additional authority over digital assets and the “explosive growth of prediction markets,” Kennedy noted. “I do believe that with additional resources — they’re about to perhaps receive additional authorities under the CLARITY Act — with additional resources to address these new asset classes in the cash markets and crypto, as well as to deal with the explosive growth of prediction markets, I think that the CFTC certainly should receive additional resources,” he said.
CFTC Chair Michael Selig, the only Senate-confirmed member heading the agency, has unilaterally claimed “exclusive jurisdiction” over prediction market companies, arguing event contracts qualify as “swaps.” Consequently, his position has triggered what Democratic senators call an “assault” on state authorities attempting to regulate these platforms, with some states filing lawsuits against Kalshi and Polymarket over sports betting.
Last week, Selig ordered Kalshi to ignore a Michigan court ruling, which the company said “put [it] in an impossible position” between state and federal authorities. Meanwhile, legal experts anticipate one or more prediction market cases could eventually reach the US Supreme Court to resolve the clash between state and federal regulators.
Republican senators pushing for a vote on the CLARITY Act before the August state work periods expect to release the bill’s text soon. In June, gambling industry groups petitioned the Senate to add language prohibiting event contracts tied to sports and casino-style gaming.
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