Prediction Market Regulation Advances Under CFTC Exclusive Authority Push
The White House, via the Office of Management and Budget (OMB), launched its review of a Commodity Futures Trading Commission proposal that would establish formal rules for prediction markets, a filing released on May 27, 2026, confirms. This step comes as President Trump strongly endorsed the CFTC maintaining sole oversight, aiming to shield platforms like Kalshi and Polymarket from state-level interference. The sides are shaping up in this legal jurisdiction battle between states and their state gaming regulators, and prediction markets and the federal CFTC, the latter now openly supported by the President.
Since early 2025, monthly trading volumes across major prediction market platforms have climbed sharply, often exceeding $20 billion during peak periods. Contracts tied to sports outcomes and political events dominate activity, though cultural, entertainment, and crypto contract sectors are growing.
The rapidly growing interest in prediction markets has put them front and center in a federal-state showdown over which level of government is the appropriate regulatory venue.
Recent Trading Volumes on Leading Platforms
| Platform | Recent Monthly Volume | Primary Focus | Status |
|---|---|---|---|
| Kalshi | $5.4B+ | Sports (~85%) | CFTC-regulated |
| Polymarket | $2B+ (global) | Politics & events | Offshore with US arm |
| Polymarket US | Lower volumes | US-compliant contracts | Offshore with the US arm |
Trump Endorses CFTC Exclusive Jurisdiction Over Prediction Markets
On the same day the OMB filing emerged, President Trump posted on Truth Social, declaring that preserving the CFTC’s exclusive authority stands “critically important” for these markets to thrive. He sharply criticized state figures, including Chris Christie, Letitia James, Tim Walz, and JB Pritzker, labeling their regulatory efforts as undermining national standards for a burgeoning financial trading market.
Trump’s outspoken support aligns with moves by CFTC Chairman Michael Selig, who has withdrawn prior restrictive proposals and is now defending federal preemption in all prediction market matters in court. This battle is far from over.
Gary Gensler Questions Scope of CFTC Authority on Prediction Markets
Former CFTC Chair Gary Gensler challenged Trump’s push during a May 27 appearance on CNBC’s Squawk on the Street. Gensler claims that the CFTC lacks sufficient backing under the Dodd-Frank Act to comprehensively regulate the expansion of sports-like contracts that drive much of the trading on Kalshi and Polymarket. Gensler advocated for greater state involvement while cautioning that the CFTC might become overwhelmed.
Watch: Former CFTC Chair Gary Gensler shares views on Squawk on the Street, May 27, 2026.
Gensler pointed to the CFTC’s core focus on traditional commodities and questioned its fit for granular athletic outcome contracts. His is perhaps more of a practical argument than a scholarly legal one. Simply put, the CFTC isn’t equipped to oversee a massive sports betting market.
Gensler suggested the dispute could head to the Supreme Court for ultimate resolution. A fairly common speculation among experts in the field is that a hodgepodge of state-versus-federal priorities will eventually require practical adjudication.
State Actions Create Challenges for Prediction Market Operators
Several states have already moved aggressively against the platforms. Minnesota Governor Tim Walz signed the first statewide ban, while Illinois Governor JB Pritzker restricted employee trading on nonpublic information. New York Attorney General Letitia James has filed lawsuits alleging illegal gambling operations. These efforts clash directly with the federal push for unified CFTC rules.
In total, 41 state attorneys general have signed a letter of support for state regulation of prediction markets, cutting across both Democratic and Republican states.
Key State-Level Moves Targeting Prediction Markets
- Minnesota: Enacted the first full ban
- New York: Multiple lawsuits against operators
- Illinois: Executive order limiting employee trades
- Others: Cease-and-desist actions and court briefs
The CFTC has countered with amicus briefs and federal district court lawsuits asserting preemption.
OMB Review Signals Path Forward for CFTC Rules
Specific details of the CFTC proposal will remain confidential during the Office of Management and Budget examination. The OMB review is expected to cover contract listing standards, manipulation prevention, and public interest tests.
Clear federal rules regarding prediction markets could attract deeper institutional involvement and provide legal certainty that supports sustained commercial investment. With strong White House backing and record trading volumes climbing each week, the prediction market sector appears poised for a defining phase toward fully integrated, highly-trusted financial market status.
