CFTC chair Michael Selig on prediction markets – Business News
Commodity Futures Trading Commission chairman Michael Selig desires America to be the hub for prediction markets. He additionally desires the industry to know he’s watching each commerce.
In a sit-down interview with NYNext at CFTC headquarters in Washington this week, Selig, 36, laid out his imaginative and prescient. The regulator is intent on protecting prediction markets — which permit customers to guess on every little thing from election outcomes to Oscar winners to oil costs — secure for merchants. He desires to stability innovation and enforcement within the new regulatory framework he’s making an attempt to codify
”I need the United States to be the markets capital of the world,” Selig mentioned. “Whether it’s prediction markets, crypto, traditional markets — if we don’t take leadership there, we’re going to see these markets flourish offshore.”
Ironically, Selig, who was sworn in on Dec. 22, 2025, anticipated to spend his tenure wrestling with digital property — e to manage Bitcoin and Ethereum spot markets or overseeing DeFi builders. Instead he has been inundated with one thing no one noticed coming at scale: prediction markets, and what Washington’s position in regulating them needs to be.
CFTC Chair Michael Selig mentioned, ”I need the United States to be the markets capital of the world.” Bloomberg through Getty Images
Prediction markets drew widespread consideration during the 2024 election cycle, when platforms equivalent to Kalshi and offshore rival Polymarket forecasted a Trump landslide at a time when main polls mentioned the race was a toss-up. Now, Washington is racing to determine how to manage an industry that didn’t exist at scale simply a few years in the past — and whether or not the principles are ample to stop these with inside data from cashing in.
“We’re investigating various participants in the markets on a daily basis, we’re working with the exchanges … and the exchanges have brought several actions now against persons for insider trading and manipulation in their markets,” Selig instructed NYNext. “When we see unusual trading activity ahead of a big event … the Oscars … we take action.”
Last month, following the Academy Awards, The Post reported that some betting on the awards might have had an inside monitor.
But in latest weeks, Selig has been much less involved with unhealthy actors (or Oscar-winning actors) and more involved with states.
Last month, the CFTC issued an superior discover of proposed rulemaking — which permits anybody to chime in on whether or not they assume these tips are truthful. Bloomberg through Getty Images
The company filed go well with final week towards Illinois, Arizona, and Connecticut, which Selig mentioned are “effectively trying to nullify federal law” by regulating prediction markets as playing merchandise below state jurisdiction.
He tells me they notched a important legal win within the Third Circuit Court of Appeals on Tuesday in Philadelphia, the place a decide ruled that federal law, not state gaming statutes, governs prediction markets.
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Last month, the CFTC issued an superior discover of proposed rulemaking — which permits anybody to chime in on whether or not they assume these tips are truthful. The framework has acquired more than 1,000 feedback which the CFTC is working to fold in.
Some proposed guidelines are apparent purple strains. “An injury contract where a sports player might try to injure another player — that could be manipulated,” Selig mentioned. Contracts tied to unsportsmanlike conduct calls, assassination, or terrorism could be equally flagged.
The CFTC notched a important legal win within the Third Circuit Court of Appeals on Tuesday in Philadelphia, the place a decide ruled that federal law, not state gaming statutes, governs prediction markets. Bloomberg through Getty Images
But Selig is clear-eyed about what over-regulation prices. He mentioned the Biden administration “drove many of these markets offshore” by means of regulation by enforcement.
“Unfortunately … there was this attempt just to ban these contracts outright and not set real clear guidelines and rules for what’s susceptible to manipulation.”
He factors to the way in which music was regulated within the early days of the web as a method for the US to develop into the hub for prediction markets.
“If you think back to the Napster or Spotify versus iTunes saga,” Selig mentioned, “Once you had clear guidelines of the street within the United States, as soon as there was a cause to make use of the more well-regulated and legal platform, everybody began doing that. No one’s utilizing Napster or BitTorrent to get their music anymore. They’re on iTunes or Spotify — and we count on to see the identical with prediction markets.
Kalshi requires each person to add a government-issued ID and undergo identification verification. All trading exercise is reported to the CFTC each day, Kalshi’s head of enforcement, Bobby DeNault, instructed NYNext. Bloomberg through Getty Images
Some critics are apprehensive that Selig might not be aggressive enough and that these markets are inherently predatory.
“If you’re going to use inside information to bet on particular stocks, there are a whole bunch of things that can affect the prices of these things,” David Bieri, an economist at Virginia Tech, instructed NYNext. Bieri argues prediction markets make insider trading uniquely simple as a result of they assist you to guess on a single, discrete occasion.
Selig believes it’s not the markets however the lack of ability to supervise them within the US that’s the drawback.
”The exchanges should do KYC (Know your buyer) and AML (anti-money laundering) checks on all of the merchants, in order that they perceive who’s within the markets,” he mentioned.
Prediction markets permit customers to guess on every little thing from election outcomes to Oscar winners to oil costs. GC Images
Kalshi requires each person to add a government-issued ID and undergo identification verification. All trading exercise is reported to the CFTC each day, Kalshi’s head of enforcement, Bobby DeNault, instructed me.
Exchanges which are primarily based and operate abroad, like Polymarket, have no such oversight, which implies nameless crypto wallets with money from wherever on this planet can doubtlessly sway public notion in an election.
Robin Hanson, the George Mason economist who pioneered prediction market idea, believes all of that is finally making an attempt to undermine free markets solely
Exchanges which are primarily based and operate abroad, like Polymarket, have no such oversight, which implies nameless crypto wallets with money from wherever on this planet can doubtlessly sway public notion in an election. AFP through Getty Images
“People don’t like prediction markets and decided that [highlighting possible] insider trading is the approach to take” to undermine them, he instructed me.
Insider trading, he argues, is way more rampant elsewhere. “Ordinary markets have insider trading they don’t like to admit [to], and the vast majority of it is never caught.”
He notes that a important quantity of price motion in a stock occurs earlier than a company makes a public announcement, “and that is due to insider trading … and that is vastly more than the level that is caught.”
Not surprisingly, Kalshi makes the identical argument. “The average retail trade on Kalshi is well under $100 … making it hard to profit meaningfully from inside information without triggering automatic flags,” DeNault mentioned.
“Any trading activity that’s abnormally large is going to stand out,” he added. “We don’t have anybody making those kinds of profits in our market.”
Hanson added this is identical debate that at all times pops up following financial innovation whether or not it’s insurance coverage, commodity futures, choices, or shares.
“Almost all financial markets were illegal initially because they were seen as gambling.”
