Commodity Futures Trading Commission Chairman Mike Selig told CoinDesk that the agency will continue to defend its “exclusive regulatory authority” to oversee prediction markets in court. “It doesn’t matter if it’s sports, politics or anything else, if it’s a product validly offered within a CFTC-regulated exchange, then we regulate it,” Selig said.
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NASHVILLE, Tennessee – The Commodity Futures Trading Commission is simply defending its turf by suing states over prediction markets, the regulator’s head told CoinDesk.
CFTC Chairman Mike Selig, speaking on the sidelines of the Digital Assets and Emerging Technologies Policy Summit hosted by Vanderbilt University and the Blockchain Association on Monday, said the agency’s lawsuits against Arizona, Illinois and Connecticut make “very clear… that the CFTC has exclusive regulatory authority when it comes to commodity derivatives markets.”
Selig, who will speak at CoinDesk’s Consensus Miami conference next month, said the Third Circuit Court’s ruling on Monday that the CFTC has to supervise prediction markets reinforced his agency’s view.
Under Selig, the CFTC has embarked on a major litigation effort to bolster prediction markets’ arguments that they are providing derivative products under the Commodity Exchange Act, rather than state-regulated gaming services.
“Our view is that the statute is very clear that when a swap is offered in a federally regulated Designated Contract Market, that transaction, those transactions, are subject to federal regulation,” he said. “It doesn’t matter if it’s sports, politics, or anything else; if it’s a product validly offered within a CFTC-regulated exchange, then we regulate it, and states don’t have the ability to override federal oversight and preempt gambling laws where derivatives laws apply.”
When asked why the CFTC didn’t sue Nevada or Massachusetts (two states that have successfully obtained preliminary injunctions against prediction market providers), Selig said he “wouldn’t say, just because these are the first states, that they will be the last.”
He noted that the CFTC filed an amicus brief in a consolidated case before the Ninth Circuit Court of Appeals, which will be heard next week. The Ninth Circuit includes Nevada.
Dodd-Frank Exchanges
Under the Dodd-Frank Act, the CFTC can regulate swaps and lock in certain rates based on whether they are in the public interest. These categories include war, terrorism, murder, gambling, anything else illegal, or “other similar activity.”
Selig said the main issue is that under the law, the CFTC decides whether a product is contrary to the public interest. The lawsuits in which he participates focus on that aspect, regardless of the facts underlying the contracts.
“Even if those underlying categories, whether it’s war terrorism, murder, gambling, etc., even if we have to do a public interest analysis, or we choose to do a public interest analysis, that doesn’t mean that that’s not within our exclusive regulatory authority,” he said. “And that’s what the cases are about, and that’s what we’re fighting for.”
The CFTC is currently going through the formal rulemaking process to clarify its oversight of prediction markets.
“We are open to suggestions about what that process should look like and how to evaluate it,” he said. “We are certainly considering that provision of the Dodd-Frank Act.”
Interpretive guidance
Outside of prediction markets, Selig said the CFTC would review any comments on the final interpretation it released to the Securities and Exchange Commission last month.
“To the extent we get feedback on certain things we might change or need to reconsider, we certainly will,” he said.
More importantly, he said, creating a taxonomy means that if a company wants to self-certify a futures product tied to a digital asset, the CFTC and SEC can simply consult their guidelines to ensure the token is not a security.
“To the extent you have a tokenized security, we won’t be faced with the CFTC claiming it’s a commodity or the SEC claiming a different type of commodity as a security,” he said. “We have clear lines drawn in the statute.”
The guidance was intended to be comprehensive, so both companies and agencies had examples, he said.
“We should be very aligned across agencies,” he said.
Monday
- 13:00 UTC (9:00 am ET) SEC Chairman Paul Atkins will speak at the IMF-IOSCO conference on new technologies.
Thursday
- 14:00 UTC (10:00 am ET) The House Agriculture Committee will hold a hearing with CFTC Chairman Mike Selig. There are not many details on the subject of the hearing; he simply said it is “for the purpose of receiving testimony.”
- 16:00 UTC (9:00 am PT) A panel of the Ninth Circuit Court of Appeals will hear arguments in a consolidated set of cases on prediction markets and state regulators. The CFTC filed an amicus brief in this case and will also speak during arguments.
If you have any ideas or questions about what I should discuss next week or any other feedback you would like to share, feel free to email me at [email protected] or find me on Bluesky @nikhileshde.bsky.social.
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See you next week!
