Prediction Markets face preemption test as CFTC steps in

CFTC claims exclusive federal jurisdiction over prediction markets under CEA

The Commodity Futures Trading Commission (CFTC) is asserting that prediction markets fall under its exclusive federal jurisdiction via the Commodity Exchange Act (CEA). As reported by CNBC (https://www.cnbc.com/2026/02/17/cftc-defends-prediction-market-enforcement-states-challenge.html), Chairman Michael Selig said the agency has filed an amicus brief in federal court to reinforce that position.

The CFTC’s message is that event contracts are derivatives subject to federal oversight, not gambling products subject to a patchwork of state rules. The agency’s stance directly challenges recent state-level enforcement against platforms offering election or sports-based markets.

Why this matters: federal preemption, compliance, and state pushback

At the center is federal preemption: if the CEA governs event contracts as derivatives, conflicting state gambling restrictions may be displaced. That outcome would streamline compliance for multi-state operators, though it ultimately depends on how courts read the statute.

States have moved to curb sports and event-based prediction products through cease-and-desist orders and lawsuits. As reported by DL News (https://www.dlnews.com/articles/regulation/cftc-claims-sole-authority-to-regulate-prediction-markets/), actions have included Nevada deeming Kalshi subject to state gambling regulation, with Maryland courts leaning toward state oversight in certain rulings.

Industry lawyers note the jurisdictional question is far from settled, even with stepped-up federal advocacy. “Selig’s remarks make clear that the CFTC is planting the flag as the preeminent and exclusive regulator of prediction markets,” said Stephen C. Piepgrass, partner at Troutman Pepper (https://www.troutman.com/insights/cftc-withdraws-proposed-rule-on-prediction-markets/).

Political resistance is also growing at the state level. According to Bloomberg Law (https://news.bloomberglaw.com/business-and-practice/cftc-faces-more-pushback-from-states-over-prediction-markets), Utah Governor Spencer Cox vowed to push back against what he views as federal overreach into traditional gambling domains.

Commodity Exchange Act, preemption, and case landscape explained

The CEA’s scope and the meaning of “exclusive jurisdiction” are driving parallel court and regulatory actions. Operators face a moving compliance target as the CFTC and states advance competing theories.

How event contracts fit the Commodity Exchange Act framework

The CFTC frames event contracts as swaps or derivatives that convey economic exposure to the outcome of an uncertain event. According to Next.io (https://next.io/news/regulation/cftc-chair-slams-overzealous-regulators-targeting-prediction-markets/), Chairman Selig has argued that attempts by states to ban such products amount to challenges to the agency’s exclusive jurisdiction under the CEA.

Regulatory posture is evolving inside the agency as well. As reported by Business Insider (https://www.businessinsider.com/cftc-kalshi-prediction-markets-gambling-lawsuits-selig-memo-2026-1), Selig directed staff to withdraw prior advisories that cautioned on sports-related contracts and to develop clearer standards for event contracts.

Case tracker: amicus filing, state actions, Kalshi and Coinbase

The CFTC has entered federal court with an amicus brief to bolster its authority over event contracts. That filing signals the agency’s willingness to litigate the preemption question alongside any future rulemaking.

Several states continue enforcement efforts targeting sports and election markets, with some naming Kalshi or applying state gambling frameworks to similar platforms. These actions create operational uncertainty and force venue-by-venue compliance strategies.

Coinbase has sought judicial clarity, filing suits in Connecticut, Illinois, and Michigan. According to Cointelegraph (https://cointelegraph.com/news/coinbase-sues-states-prediction-markets), the company argues that prediction markets offered via CFTC-regulated venues are derivatives governed by federal law rather than state gambling statutes.

At the time of this writing, CME Group shares were $303.29, based on data from Yahoo Scout. While not dispositive of legal outcomes, derivatives market activity provides context for the CFTC’s policy focus on event-linked contracts.