CFTC chair denounces state criminal cases against prediction-market executives

Commodity Futures Trading Commission Chair Michael Selig has condemned state efforts to pursue criminal cases against prediction-market executives, arguing that disputes over their products should be decided in court rather than expose company leaders to jail.

Speaking at the Cantor Convergence conference, Selig called the state litigation “really egregious.” He said states were “essentially trying to lock up founders and CEOs” offering products that he considers lawful under a federal regulatory regime.

“Somebody says it’s gambling, somebody says it’s a derivative,” Selig said. “That’s not something that should be at the risk of going to jail.” He said he would rather see the question resolved by the Supreme Court than fought separately in state after state.

The CFTC says it has exclusive jurisdiction over commodity-derivatives markets, including event contracts commonly called prediction markets. The agency says those contracts can be used to hedge event-driven risks, manage portfolio exposure and provide information about future events. It first officially recognized such contracts in 1992, when it allowed the Iowa Electronic Markets to operate contracts tied to presidential elections and corporate earnings.

In Utah, Attorney General Derek Brown charged Kalshi, its co-founder and chief executive Tarek Mansour, and co-founder and chief operating officer Luana Lopes Lara over sports bets offered between Sept. 13 and Sept. 24. Each defendant faces 13 felony charges and one misdemeanor, according to Ars Technica.

Brown has called Kalshi an online casino operating in violation of Utah law. Kalshi has described the prosecution as overreach and said it would challenge it in court.

The CFTC and the Justice Department sued Arkansas Attorney General Tim Griffin after he brought a Nov. 4 action alleging that Kalshi operated an illegal gambling platform. The federal agencies argued that the targeted event contracts are swaps under the Commodity Exchange Act and asked for preliminary and permanent injunctions against Arkansas’s action.

Roughly a dozen states and cities are now involved in disputes over whether event contracts offered by platforms including Kalshi and Polymarket amount to illegal gambling. Louisiana has also sued Kalshi, Polymarket, Robinhood and Coinbase.

The legal record is unsettled. In August, the Ninth Circuit held that Kalshi had not shown that the Commodity Exchange Act pre-empts Nevada gaming rules for its sports-event contracts, concluding those contracts were sports bets rather than swaps. The court upheld the dissolution of an injunction that had prevented Nevada from enforcing its laws against Kalshi’s sports contracts, while sending the election-contract issue back for further proceedings.

As we reported in October, Kalshi’s chief executive Tarek Mansour has separately said the conflict over state authority could ultimately reach the Supreme Court. Selig said the CFTC would continue defending its jurisdiction and would fight the issue to the court if necessary.

New Jersey has already petitioned the Supreme Court to address the wider conflict, a move supported by 39 other states and the District of Columbia.