Prediction markets to get new federal rules, CFTC chair says

Driving the news: CFTC chair Michael Selig said in prepared remarks that "it is time for clear rules and a clear understanding that the CFTC supports lawful innovation in these markets."

• "Consistent with my commitment to fostering responsible innovation in crypto asset markets, I will continue to support the responsible development of event contract markets and the important role they play in the broader financial system," he added.

State of play: Prediction markets from the likes of Kalshi, Polymarket, DraftKings, FanDuel, Fanatics, Coinbase and Robinhood are surging in popularity, with many of them offering people the chance to risk money on sports in states where sports betting hasn't been legalized.

• The issue has split the gambling world, with the casino industry opposing prediction markets while native prediction markets and standalone sportsbook apps jump on board.

The intrigue: Selig said he has directed CFTC staff to vacate a 2024 rule that would have banned event contracts on politics and sports.

• He also told them to withdraw a 2025 advisory that he said "cautioned registrants about offering access to sports-related event contracts due to ongoing litigation."

What to watch: Whether the CFTC becomes a legal force in support of federal oversight of event contracts, usurping state gaming commissions.

• "I have directed CFTC staff to reassess the Commission's participation in matters currently pending before the federal district and circuit courts," Selig said. "Where jurisdictional questions are at issue, the Commission has the expertise and responsibility to defend its exclusive jurisdiction over commodity derivatives.

What they're saying: Reps from Polymarket and the recently formed Coalition for Prediction Markets — whose members include Kalshi — did not immediately respond to requests for comment.