The US Commodity Futures Trading Commission (CFTC) has moved to defend its oversight of prediction markets after a group of senators raised concerns over contracts linked to sports and political events. In a recent letter, lawmakers led by Senator Catherine Cortez Masto questioned whether federally regulated event contracts are, in practice, functioning as unlicensed gambling products that undercut state and tribal gaming frameworks.
Acting CFTC chair Caroline Pham responded by stressing that prediction markets listed on designated contract markets (DCMs) such as Kalshi operate under the Commodity Exchange Act (CEA) and are subject to federal derivatives regulation. Pham argued that, as long as products are listed through the self-certification process in CEA section 5c(c) and do not fall into categories explicitly prohibited by Rule 40.11—such as assassination, terrorism or other unlawful activities—they are lawful derivatives, not off–shore betting schemes.
The senators’ letter highlighted fears that political and sports event contracts could circumvent state gambling laws and erode the value of compacts signed under the Indian Gaming Regulatory Act (IGRA). Several state regulators and tribal operators have previously warned that growth in real-money event trading may dilute their tax base and infringe on exclusive gaming rights. The lawmakers also pressed the CFTC on whether it is using its authority under section 5c(c)(5)(C) of the CEA, which allows the agency to block contracts deemed “contrary to the public interest.”
The exchange comes as the CFTC continues work on a far-reaching event contracts rule that could restrict or even prohibit trading on certain political outcomes. At the same time, platforms like Kalshi have aggressively expanded via self-certification, adding sports parlays and, more recently, political–economic combinations. The result is a growing tension between a formal, statute-driven approach at the federal level and mounting political pressure from Congress, states and tribes to rein in the emerging market for regulated prediction contracts.
