Key Takeaways
- ▸ CFTC Chair Michael S. Selig signaled an aggressive stance on fraud, manipulation, and insider trading as scrutiny of prediction markets intensifies.
- ▸ Selig reaffirms sports need to be well-functioning and comprehensively regulated by the CFTC “… our statute mandates it, and we’ll continue to do it.”
- ▸ Members of Congress raised red flags about the CFTC operating with a single commissioner, questioning whether major rulemaking and enforcement decisions should proceed without the bipartisan structure intended by law.
Lawmakers on the House Agriculture Committee questioned Commodity Futures Trading Commission chairman Mike Selig during a hearing on Thursday, as scrutiny of prediction markets continues to intensify. The hearing was held in the Agriculture Committee due to its oversight duties related to the CFTC.
In prepared testimony, Selig leaned heavily on enforcement, signaling the CFTC intends to pursue fraud, manipulation and insider trading across derivatives markets, including activity involving nonpublic government information being used to inform trading.
“I want to be crystal clear: to anyone who engages in fraud, manipulation, or insider trading in any of our markets, we will find you, and you will face the full force of the law,” Selig said in his opening prepared remarks. “Nothing is more important than protecting market integrity and that’s why I’ve been diligently working to reinvigorate our enforcement division and upgrade our surveillance tools to meet the challenges of our growing markets.”
The hearing quickly expanded beyond Selig’s initial testimony, with committee members from both parties pressing Selig on topics like sports event contracts and whether federal oversight is allowing platforms to bypass state gaming laws and tribal compacts. There were also questions related to the CFTC’s role in ongoing legal battles with states over jurisdiction.
The lawmakers also asked questions about CFTC staffing and the four open commissioner roles, as well as the agency’s structure and decision-making, setting up broader debates over authority, enforcement and the future regulatory framework for prediction markets.
Selig says exchanges, not CFTC, are first line of defense for insider trading violations
Concerns about insider trading drove many of the exchanges during the hearing, with lawmakers pressing Selig on whether prediction markets allow traders to profit from the use of nonpublic information. The line of questioning builds on recent congressional letters and proposed legislation raising similar concerns, including warnings that event-based markets tied to geopolitical developments could be vulnerable to misuse of sensitive information.
Ranking committee member Rep. Angie Craig (D-Minn.) recently sent a letter to Selig asking that the CFTC “circulate executive branch-wide guidance explaining that federal employees must refrain from insider trading in prediction markets.” During the hearing, Craig asked Selig how the commission “engages to police these markets” compared to the self-regulatory role that prediction market platforms play.
“The Commodity Exchange Act sets forth a regulatory scheme where the exchanges are the first line of defense,” Selig said. “They are self regulatory organizations, which means that they have quasi regulatory authority granted to them by the government.”
Selig described the CFTC as the “second line” of defense, saying that the agency regularly reviews and surveils platform activity and each contract the exchanges self-certify.
“So it’s a comprehensive scheme where we have multiple levels of review of each contract and various activities in the markets, and we will continue to work together with the exchanges to make sure that the markets are well functioning,” Selig said.
Craig pressed Selig on how many self-certified contracts the CFTC has actually rejected. Selig said he didn’t have an exact number, but that the agency “regularly reject(s) contracts.” The chairman referenced the recent issuance of Advance Notice of Proposed Rulemaking (ANPR), which is seeking feedback from stakeholders and the general public about numerous topics, including which types of contracts should be allowed. The feedback will help inform any new rules or regulations the agency adopts.
“Under the prior administration, there was a lack of clarity on a lot of these contracts, and the floodgates really opened, and I inherited a lot of these contracts when I took office just over a 100 days ago,” Selig explained. “So we’re actively reviewing what’s out there. We’re making sure there’s clear guidelines and guidance.”
Committee members question CFTC staffing levels
Craig also questioned whether the CFTC had adequate staffing to oversee “continued growth of traditional futures markets, the swaps markets, and emerging digital assets and prediction markets.” She said that the CFTC currently has approximately 543 full time employees, which is down from 708 at the end of fiscal year 2024. Craig said the agency’s budget request only seeks to fund a total of 650 employees and asked whether the agency can be effective with those staffing levels.
Selig said that the commission was working better than ever with its current staffing, but that they are actively hiring.
“I do believe that we are running more efficiently and effectively than ever before, thanks to some of the right sizing of the government that’s occurred under this administration,” Selig said. “We’re hiring very talented people from the private sector, as well as talent from throughout the government. So we will continue to build up our staff. We … are actively looking for folks, but it’s absolutely critical that we have the funding and resources to continue to monitor and surveil our markets.”
Selig stands as the only commissioner of the CFTC at the moment. The agency is structured to include five commissioners, with no more than three commissioners from any one party. Rep. Jim Costa (D-CA) said he found it “inappropriate” that Selig is the sole commissioner with such important questions in front of the agency.
“No one has determined that you’re Solomon-like, nor king,” Costa said. “I think it’s, uh, inappropriate to have one person, as much as you’ll try to be attentive to making these determinations, when the law was very clearly intended to be a bipartisan representation.”
Craig asked Selig whether he would commit to adding commissioners on a bipatristan basis. She also asked him to commit to not finalizing any new regulations with him sitting as the only commissioner.
“The president makes decisions around nominations, and so I look forward to working with whoever the president chooses to nominate,” Selig said. “But in the interim, we cannot, for the sake of the American people, slow down in our rulemaking. It’s very important that we get investor protections, consumer protections, and safeguards for our markets. And so I cannot, unfortunately, commit to not do my job that I was appointed to do by the president.”
Lawmakers say sports event contract trading cuts into state, tribal authority and revenue
Members of the committee asked several questions related to CFTC-regulated prediction market platforms offering sports event contracts, which has been at the center of many legal battles with states that argue that they are essentially illegal sports betting that should fall under their oversight.
Rep. Gabe Vasquez (D-NM) brought out a board featuring two sets of similar betting lines for an MLB game and asked Selig if he could differentiate between the two. Selig said he wasn’t an “expert on identifying betting lines,” and asked the lawmaker to enlighten him. Vasquez then revealed that one set of betting lines was from a state-regulated sportsbook, while the other was from a federally-regulated prediction market platform.
“Well, it’s clear to me that you can’t tell, and that’s the problem because the average consumer also can’t tell,” Vasquez said, adding that, while there isn’t much difference, “they are regulated completely differently.”
Vasquez said that gaming tribes in his district and gambling regimes in other states have gone through extensive processes and negotiations for “gaming systems with compacts, licensing, integrity rules, age verification, and consumer protections.”
“So when a federal agency like the CFTC allows prediction markets to bypass these established, longstanding legal requirements, but under a different label, and uses loopholes to evade regulation and consumer protection standards, it undermines tribal sovereignty and state protection,” Vasquez said. “What this means, in practical terms, is that tribal communities … are losing out on vital revenue to pay for their child care, education, infrastructure, and the overall well being of their community. Not fair, right?”
Selig said that the bottom line is that sports markets on prediction platforms “need to be well-functioning and comprehensively regulated by the CFTC … our statute mandates it, and we’ll continue to do it.”
Connecticut Representative pushes back on CFTC lawsuit
Rep. Jahana Hayes (D-CT) also dug into questions about sports event contracts, noting Selig’s comments in an interview where he said, “It doesn’t matter if it’s on sports, politics or anything else, if it’s a validly offered product within a CFTC-regulated exchange, then we regulate that.”
Hayes also pointed to the recent CFTC lawsuits against Connecticut and other states in response to cease-and-desist letters sent by state gaming regulators asking certain platforms to stop offering sports markets in their jurisdictions.
“When the federal government steps in like this, it can undercut the work that states are already pursuing to protect their residents,” Hayes said.
“Chairman Selig, would congressional clarity on the roles and responsibilities of states regarding prediction markets help resolve this ongoing legal dispute?” Hayes continued. “And are you willing to work with Congress in a bipartisan manner to clarify that issue so it’s not a back and forth between the state and federal governments over this regulatory process?”
Selig said he appreciates concerns about states’ rights, but that the law is clear that the CFTC has exclusive regulatory authority when it comes to trading offered on designated contract markets (DCM), the agency’s designation of platforms like Kalshi and Polymarket US. “We will continue to assert ourselves in litigation to defend that right,” he said.
“It’s concerning as the chairman of the agency when states try to nullify federal law,” Selig also told Hayes. “So we will continue to defend that law in court, but, of course, we’re happy to discuss policy, and that’s why we have an advanced notice of proposed rulemaking.”
Future of prediction markets remains unsettled
The hearing underscored how unsettled the regulatory future of prediction markets remains, with lawmakers, regulators and states still sharply divided on how the products should be classified and overseen.
While Selig maintained that the CFTC has clear authority over event contracts listed on federally regulated exchanges, members of Congress repeatedly raised concerns about insider trading risks, the expansion of sports-related markets, and the agency’s ability to oversee the sector amid staffing constraints and ongoing litigation with states.
With multiple congressional proposals under consideration and courts weighing jurisdictional disputes between federal regulators and state gaming authorities, the framework governing prediction markets is likely to remain in flux in the months ahead.
Watch Thursday’s full hearing below:
