The head of the federal agency suing states over the jurisdiction of prediction marketsmade clear Thursday he does not plan to slow down.
Michael Selig told the House Agriculture Committee that the Commodity Futures Trading Commission will continue advancing oversight of prediction markets, as lawmakers questioned whether their biggest product should fall under sports betting laws and whether the agency has the resources to regulate them.
Much of the hearing centered on the CFTC’s ability to prevent insider trading, police bad actors and oversee markets tied to sensitive events.
Sports betting debate takes center stage
The last time Selig appeared before Congress during his confirmation process, he told lawmakers he would “look to the courts” to decide whether sports event contracts — which make up 87% of Kalshi’s trading volume — were legally permissible. Five months later, he filed lawsuits against Arizona, Connecticut and Illinois to block their efforts to restrict alleged unlicensed sports betting on Kalshi, Polymarket and others.
“I don’t believe Congress intended sports wagering to be repackaged as a financial product,” Rep. Jim Costa (D-CA) said, referring to the Commodity Exchange Act, which defines the types of financial contracts the CFTC is authorized to regulate.
Selig pointed to the agency’s statutory authority, emphasizing that the CEA provides a “very broad definition of the term swap” and pointing to the advance notice of proposed rulemaking issued in March, which seeks input on how to address new markets.
Do sports contracts serve a financial benefit?
Rep. Gabe Vasquez (D-NM) illustrated the issue by presenting sportsbook betting lines alongside prediction market contracts and asking Selig to distinguish between them. Selig said he was “not an expert on identifying betting lines.”
“That’s exactly the problem,” Vasquez responded, arguing that consumers cannot tell the difference either and are engaging in the same activity regardless of regulatory framework and consumer protections.
“I understand the CFTC’s role has been overseeing derivatives markets. Traditionally that has been helping businesses hedge real economic risk. Airlines hedge fuel costs. Farmers hedge crop prices. That is very different than putting money on the outcome of a baseball game,” Vasquez said.
“On a prediction market, consumers can trade on whether Astros second baseman Jose Altuve hits a home run in tonight’s game against the Rockies. Does a contract on a single player’s performance on a single statistic hedge any real economic risk?”
Selig did not directly answer the question and instead emphasized the need all markets to be overseen as congress intended.
“There are many risks that could be hedged through various contracts on our markets,” Selig responded. “The bottom line is that these markets need to be well functioning and comprehensively regulated by the CFTC. Our statute mandates it and we’ll continue to do it.”
Prediction markets insider trading concerns
Lawmakers questioned the CFTC’s ability to enforce rules on the industry it is fighting to regulate.
Costa cited reports of traders profiting from geopolitical event contracts tied to military action and leadership changes abroad, while Rep. Jim McGovern (D-MA) raised concerns about large, well-timed trades in equities and oil futures placed shortly before market-moving announcements from the White House.
He asked whether individuals with access to nonpublic government information could be using prediction markets to profit, pressing Selig on whether the agency is equipped to detect and prevent such activity.
Selig did not directly address specific incidents, reiterating that the agency has a “zero tolerance” policy for fraud, manipulation and insider trading and that any violations would face enforcement action.
Rep. Andrea Salinas (D-OR) asked how many prediction market investigations are currently underway. Selig declined to provide a number, saying disclosure could hinder ongoing probes, though he said the agency receives “hundreds of tips” that prompt investigations.
Enough resources to police prediction markets?
The agency currently has just one of five commissioner seats filled and is operating with roughly 20% fewer staff than in 2024.
Rep. Shontel Brown (D-OH) asked whether the agency has sufficient resources to oversee the market and prevent insider trading as the industry rapidly expands.
“A lot of that fake news out there about us being under-resourced is incorrect,” Selig said. “There are certain vacancies that we are filling. That does not mean that we don’t have the resources and staff to fulfill our mission.”
The CFTC has not yet finalized any binding rules governing these markets. The agency’s notice of proposed rulemaking has received more than 800 public comments since the process opened a month ago.
Congress weighs next steps
Several lawmakers are mulling legislative responses, including proposals to prohibit sports-related event contracts and impose geofencing requirements to align prediction markets with state gambling laws.
Costa said he is drafting legislation to prohibit sports event contracts, while Salinas pointed to proposals aimed at insider trading. Others referenced ongoing discussions around strengthening restrictions on insider trading and clarifying the boundary between federally regulated derivatives and state-controlled sports betting frameworks.
Several other proposals aimed at curbing insider trading, limiting political participation and restricting contracts tied to sports and other sensitive events have been introduced in recent months.
