Democratic Senators Urge Committee to Block CFTC Funding for Prediction Market Lawsuits

Seventeen Democratic US senators are urging Senate appropriators to prevent the Commodity Futures Trading Commission (CFTC) from using federal funds to pursue lawsuits against state-level authorities targeting prediction markets. According to Cointelegraph, the lawmakers argue that the agency’s litigation strategy could undermine state consumer protections and oversight related to gambling-style products. In a Wednesday letter to the chair and ranking member of the Senate Appropriations Subcommittee on Financial Services and General Government, Senator Richard Blumenthal, Senator Jeff Merkley, and 15 other Democrats asked committee leaders to block funding for CFTC Chair Michael Selig’s legal fights with state gaming authorities. The senators criticized what they described as a “campaign of litigation and intimidation,” warning that the CFTC could become an “instrument and enabler” for online prediction markets seeking to bypass state rules, potentially creating a “race-to-the-bottom in gambling.” Selig has defended the agency’s stance that the CFTC has “exclusive jurisdiction” over prediction markets, asserting that event contracts offered on these platforms qualify as “swaps” under the agency’s authority. As of June, the CFTC has been involved in legal disputes tied to prediction markets in Connecticut, Illinois, Arizona, Kentucky, Wisconsin, New York, Minnesota, Rhode Island, and New Mexico. Some companies, including Kalshi and Polymarket, have also filed lawsuits against state authorities while supporting the CFTC’s position. The expanding set of cases has led some experts to expect that one dispute between the CFTC and state gaming regulators could ultimately reach the US Supreme Court. The article notes that in its 2018 ruling in Murphy v. National Collegiate Athletic Association, the Court held that individual states have the authority to regulate sports betting, and a future writ of certiorari in one of the current cases could prompt the justices to revisit questions about the scope of that authority. The debate is unfolding as Selig leads the CFTC as its sole commissioner and chair under U.S. President Donald Trump, and has pledged to pursue state authorities that crack down on prediction markets. While the CFTC’s leadership is typically expected to include a bipartisan group of five commissioners, Trump has not announced any intention of filling the seats as of Friday. The dispute also coincides with an expected US Senate vote on the Digital Asset Market Clarity (CLARITY) Act, which would define separate regulatory roles for the CFTC and the Securities and Exchange Commission over digital assets. Last week, gaming organizations petitioned the Senate to add language barring sports event contracts in the CLARITY Act, arguing the CFTC was not created to regulate such wagers.