CFTC Backs Prediction Markets in Fight with States

The U.S. Commodity Futures Trading Commission (CFTC) is asserting federal authority over prediction markets, intervening in a growing dispute with state regulators who seek to classify these platforms as illegal gambling. This move signals increased federal support for prediction markets and could limit states’ ability to regulate them.

CFTC Files Brief Supporting Crypto.com

The CFTC filed a “friend of the court” brief in support of Crypto.com in its legal battle with Nevada, marking the first time under Chairman Michael Selig the agency has taken a side in the escalating conflict between regulators and prediction markets. NBC News reported the filing on February 17, 2026.

The Core of the Dispute: Federal vs. State Jurisdiction

The central argument revolves around whether prediction markets fall under the CFTC’s jurisdiction as commodity derivatives or are subject to state gambling laws. The CFTC argues that Congress granted it “exclusive jurisdiction” over futures and related products, including event contracts, under the Dodd-Frank Act. CNBC details this claim.

Selig stated the CFTC “will no longer sit idly by while overzealous state governments undermine the agency’s exclusive jurisdiction,” emphasizing that event contracts are “commodity derivatives” and fall within the CFTC’s regulatory scope. He further distinguished these contracts from traditional casino betting, highlighting features like clearinghouses, netting, and investor protections. CNBC

Nevada’s Challenge and the Ninth Circuit

Nevada sued Kalshi Inc., a prediction market exchange, immediately after the Ninth Circuit Court of Appeals denied Kalshi’s request to block the enforcement action. Bloomberg Law reports that the CFTC argues states shouldn’t be allowed to “re-characterize swaps trading on DCMs as illegal gambling.” A lower court previously ruled that sports event contracts do not fall under the CFTC’s jurisdiction, a decision Crypto.com is appealing. NBC News

Nevada also filed a lawsuit against Kalshi in state court. Reuters reported on February 18, 2026.

Shift in CFTC Stance

This current position represents a shift from the CFTC’s previous approach under former Chairman Rostin Benam, who in 2024 proposed rules to limit contracts related to sensitive events like gaming, war, and assassinations. That rulemaking effort was abandoned earlier this month. The growth of platforms like Kalshi and Polymarket has intensified the debate.

Congressional Response

The issue has drawn attention in Congress, with divided opinions. Representative Richie Torres introduced a bill to limit the participation of elected officials in prediction markets, prompted by bets related to the arrest of Venezuelan President Nicolas Maduro. However, 21 Democratic senators urged Chairman Selig to refrain from intervening in the litigation and ensure future rules comply with existing regulations. Senator Bill Haggerty, a Republican, expressed support for clear rules to foster innovation. CNBC

Utah Governor Spencer Cox has voiced strong opposition, arguing that prediction markets are harmful and vowing to fight them in court. CNBC

Looking Ahead

The Ninth Circuit Court of Appeals’ ruling will set a precedent for the future regulation of prediction markets, determining whether they will primarily operate under federal derivatives laws or be subject to state-specific gaming regulations. The legal boundaries of event contracts remain contested until a final decision is reached.