Above and, seemingly, beyond the law, Trumpland has put the fix in on booming prediction markets.
Amid a flurry of lawsuits seeking to bring the unregulated New World iGaming (NWiG) operators to book, the Federal Commodity Futures Trading Commission (CFTC) has now unequivocally asserted: “Hands off prediction markets!”
The command has been issued by Trump administration-appointed CFTC Chair Michael S. Selig, who’s finally getting round to legislating his feral prediction market charges after a year of bluster, prevarication and grand-standing.
Prediction markets in their purest form operate under the legal behest of the CFTC, but the binary betting sites have been busting the definition of legal sports gambling since the advent of Trump 2.0.
Having batted away legal constraints from a cluster of state gambling authorities, prediction markets today are still facing legitimacy challenges in Arizona, Connecticut and Illinois in the U.S. and a number of countries, among them France, Belgium, Portugal, Hungary and Switzerland – all trying to curb their disruption of legal, codified, mainstream sports betting.
Exclusive Jurisdiction
But Washington-based CFTC has now reasserted its “clear and longstanding exclusive jurisdiction to regulate event contracts under the Commodity Exchange Act”.
“Various states have attempted to outlaw, regulate, or otherwise restrain the activities of DCMs (CFTC-approved Designated Contract Markets) that facilitate trading in lawful event contracts,” the commission announced in a press release.
“Congress long ago decided that a national framework for commodity derivatives markets was preferable to a fragmented patchwork of state regulations.
“The CFTC will continue to safeguard its exclusive regulatory authority over these markets and defend market participants against overzealous state regulators,” affirmed Selig.
“This is not the first time states have tried to impose inconsistent and contrary obligations on market participants, but Congress specifically rejected such a fragmented patchwork of state regulations because it resulted in poorer consumer protection and increased risk of fraud and manipulation.”
Frenzy
Prediction market watchers, astonished by the exponential growth and frenzy of NWiG trading since the return of Donald Trump to power, may be equally amazed by the CFTC’s judicious appropriation of “fraud and manipulation” nomenclature, given that the U.S. president’s own son, Donald J. Trump Jr., is a special adviser to both the leading prediction marketeers, Kalshi and Polymarket; Manhattan-headquartered outfits that have each surged in value from US$9 billion to US$20 billion in a mere 12-months.
And continuing on the theme of “fraud and manipulation”, it may also be apposite to note that Polymarket, as extensively reported in these pages, is currently being investigated for alleged Insider Trading on the timing of the U.S. kidnapping of Venezuelan leader Nicolás Maduro in January and the June nuclear bunker bombing of Iran by Israel last June.
While the administration-embedded CFTC has warned state lawmakers to back off, betting jurisdictions everywhere are waiting with baited breath for the commission’s impending ruling, regulation and definition of what constitutes lawful prediction market activity.
Gambling Zeitgeist
According to their own literature, the CFTC first officially recognized event contracts in 1992 when they allowed the Iowa Electronic Markets, a futures market at the University of Iowa, to buy and sell contracts pegged to events such as presidential elections and corporate earnings.
Following the 2008 financial crisis, the U.S. Congress granted the CFTC comprehensive authority over any such contract based on a commodity, which is broadly–but still not specifically–defined in statute.
And herein lies the rub — or more accurately the track that has allowed rampaging, administration-sanctioned Kalshi, Polymarket, Robinhood, et al, to seize the gambling zeitgeist and grab the riches generated by almost one-in-five U.S. citizens gambling on sports events in the last year.
Watch this space!
