US Congress eyes prediction market rules as CFTC-state clash grows
Lawmakers are weighing new legislation for sports betting prediction markets after a hearing highlighted the CFTC's struggle to regulate a sector now valued at over $37 billion amid ongoing state-federal turf wars.
A US House subcommittee signaled on Tuesday that Congress may soon intervene to regulate sports betting prediction markets, stepping into an escalating jurisdictional clash between federal regulators and individual states.
The sector has scaled rapidly, fundamentally shifting the landscape for event-based derivatives. Leading platforms Kalshi and Polymarket are now valued at roughly $22 billion and $15 billion, respectively. This rapid expansion has exposed severe cracks in the existing legal framework, which was never designed to handle sports-related wagers structured as futures contracts.
The resulting turf war centers on whether these platforms fall under federal commodities law or state gambling statutes. CFTC Chair Michael Selig has aggressively asserted the agency's "exclusive jurisdiction," backing that claim with lawsuits against several states. Those states counter that the platforms are violating local gaming laws, creating a fractured regulatory environment for operators and investors.
Congress is now weighing whether to codify the CFTC's authority, but faces immediate questions about the agency's operational capacity. The CFTC currently operates with roughly 550 employees and has requested a $410 million budget for fiscal year 2027, a 12.3% increase. The SEC, by contrast, has over 4,000 employees and is seeking $1.908 billion.
Lawmakers warned that handing the CFTC sweeping new oversight powers without corresponding funding is a flawed strategy. "If we continue to expand the agency's responsibilities without expanding its capacity, something inevitably will get left behind," said Rep. Austin Scott.
Despite these constraints, legislative momentum appears to be building. "As with many emerging technologies, our laws are being asked to answer questions that we had never really contemplated when we wrote the laws years ago," said Rep. Dusty Johnson. He later added: "Courts are acting in this space. The commission is acting in this space. I do not believe that the committee, that Congress should be silent. I do think there is work for us to do here."
House Agriculture Committee Chair Rep. Glenn "GT" Thompson struck a cautious tone, noting that any legislative action depends on identifying exact regulatory failures. "Where the commission's authority is found to be insufficient to meet its mandate to support responsible innovation and protect market participants, we will consider legislation as may be appropriate," Thompson said. "But first, the committee must understand if such gaps exist."
The CFTC is simultaneously pursuing its own regulatory path, having launched a formal rulemaking process in March aimed at developing a broader framework. For now, operators and users face prolonged uncertainty as courts, states, and Congress all vie to dictate the rules governing these lucrative platforms.
