CFTC Chairman Throws Support Behind Sports Event Contracts

• CFTC Chairman Michael Selig shared strong support for prediction markets contracts, including sports event contracts
• Selig said the CFTC will withdraw a proposed rule change to prohibit event contracts regarding sports and politics
• The CFTC also withdrew an advisory warning companies from offering sports event contracts due to ongoing litigation

The Commodity Futures Trading Commission is taking a strong stance in support of sports event contracts, with Chairman Michael Selig revealing the commission may even become involved in ongoing state litigation against companies offering prediction market contracts.

Selig, speaking at a joint CFTC and SEC event, publicly showed support for prediction market contracts. He reported several new planned initiatives from the CFTC to grow the markets and to take a more active role in defending its exclusive jurisdiction over these types of contracts.

“These markets are not new. They have operated within the CFTC’s regulatory perimeter for more than two decades. But, despite their history, many view them as novel or unsettled. That uncertainty has not served our markets well, nor has it served the public interest,” he said.

Firm Support for Event Contracts

Selig address the event contracts markets to close out his preliminary comments during the meeting. The CFTC, Selig said, will focus on supporting the prediction contract markets through several new initiatives.

Selig said this week the CFTC would withdraw a 2024 event contracts rule proposal that suggested prohibiting political and sports events, while also withdrawing a 2025 staff advisory warning for prediction market companies to be wary about offering sports event contracts due to ongoing state litigation.

The advisory, Selig said, was issued with the intent of bringing awareness to potential litigation, but has instead contributed to uncertainty around the markets.

The chairman said the CFTC will now look to draft new rules for event markets to provide clarity for prediction market companies.

“Second, looking ahead, and in the spirit of markets that trade on expectations, I have directed CFTC staff to move forward with drafting an event contracts rulemaking. For too long, the CFTC’s existing framework has proven difficult to apply and has failed our market participants. That is something I intend to fix by establishing clear standards for event contracts that provide certainty to market participants,

Finally, Selig said the CFTC could begin participating in current state lawsuits against prediction contracts.

“Third, I have directed CFTC staff to reassess the Commission’s participation in matters currently pending before the federal district and circuit courts. Where jurisdictional questions are at issue, the Commission has the expertise and responsibility to defend its exclusive jurisdiction over commodity derivatives,” he said.

Change in Direction

Selig’s comments were firm support for event contract markets, a decided change from comments he made during his confirmation hearing in November to chair the CFTC.

Appearing in front of the U.S. Senate Committee on Agriculture, Nutrition, and Forestry for his CFTC Chair nomination hearing, Selig made it clear he would depend on court opinions to determine the CFTC’s role in regulating the sports event markets.

“As someone who has spent many years practicing law at law firms as well as studying the law at law school, these are complex issues as to interpretation of what it means to constitute gaming. Of course, I have the utmost respect for judges that are working on these issues in the court systems. I intend to always adhere to the law and follow what judicial decisions tell me to follow. I also believe that these types of issues are ones we can work through together. Some of them are Congressional issues, as to whether we change statutes in certain areas…these are just very challenging, interpretive questions I will look to the courts on,” he said during the hearing.