In January, the CFTC opened a door. In March, it walked through it. Now 38 states are trying to push it back.

CFTC Chairman Michael Selig withdrew a Biden-era proposed rule that would have banned sports prediction markets, then directed staff to rescind a 2025 advisory that urged caution on sports contracts [1]. The withdrawal was not deregulation. It was a jurisdictional claim. Selig indicated the CFTC may get more involved in federal lawsuits to decide whether prediction markets are gambling or financial derivatives subject to federal exclusive oversight [1].

The distinction is not academic. If prediction markets are derivatives, they fall under CFTC jurisdiction and states cannot tax or regulate them. If they are gambling, states retain authority. New York's 51% tax on online gambling revenue generated over $1 billion in 2025 alone [2]. The fiscal stakes are enormous.

Thirty-eight states have filed an amicus brief supporting Maryland's position that states retain regulatory authority over prediction markets [2]. Kalshi and Polymarket, the two dominant platforms, facilitated an estimated $44 billion in contracts in 2025 [2]. Sports-related contracts account for roughly 75% to 90% of Kalshi's volume. The platforms insist their offerings are derivatives, not bets.

Selig's position is that the Commodity Exchange Act grants the CFTC exclusive jurisdiction over transactions on designated contract markets, leaving no room for states to regulate [3]. The states counter that federal law only displaces state authority where compliance with both is impossible. Multiple courts have been skeptical [2]. A Nevada federal court ruled in late 2025 that Kalshi's sports parlay-style markets closely resemble sportsbook bets and are therefore not swaps under the CEA — a setback for the preemption argument [2].

The 38-state coalition is the largest state-federal regulatory confrontation since the ACA. It is a power grab disguised as deregulation. The Biden-era ban's withdrawal opened the door. The federal jurisdiction claim is what walked through it.

-- HENDRIK VAN DER BERG, Brussels