Trump Backs CFTC Exclusive Authority Over Prediction Markets

President Donald Trump announced his support for the Commodity Futures Trading Commission's (CFTC) exclusive authority over prediction markets, arguing that federal jurisdiction is essential to ensure the United States remains the "Crypto Capital of the World" and stays competitive against foreign rivals. Trump described prediction markets as a major industry that requires protection and criticized state officials who seek local regulatory control.

This federal endorsement coincides with a White House review by the Office of Management and Budget of a CFTC proposal to establish formal regulatory guidelines. The proposal follows a public inquiry into insider trading and prohibited event contracts. However, former CFTC Chairman Gary Gensler challenged this position, asserting that the agency lacks the authority under the 2010 Dodd-Frank Act to oversee such markets and suggesting regulation should reside with the states.

The dispute has sparked a series of legal conflicts between the federal government and various states. Minnesota became the first state to formally ban prediction platforms like Kalshi and Polymarket through criminal penalties, prompting the CFTC to file a federal lawsuit arguing that the state lacks the authority to restrict federally regulated derivatives. Similarly, Rhode Island Attorney General Peter Neronha sued Kalshi and Polymarket for allegedly evading state gambling laws and reducing tax revenue. In response, Kalshi filed its own federal lawsuit in Rhode Island to protect its business operations. Other states, including New York, Illinois, and Arizona, have also pursued legal actions or bans, while federal courts in New Jersey and Tennessee have granted injunctions in favor of the platforms.