CFTC Chair Nominee Michael Selig Will ‘Look to Courts’ Regarding Sports Event Contract Regulations

• CFTC Chair Nominee Michael Selig said today during his nomination hearing that he will lean on courts regarding his opinion to sports event contracts
• When asked if he would commit to enforcing CFTC prohibition regarding event contracts related to gaming, he said he would adhere to court opinions and Congress
• Selig assured committee if elected as CFTC chair he would ensure sports event contract safeguards are in place to avoid manipulation

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Commodity Futures Trading Commission Chair Nominee Michael Selig will lean on the courts, ongoing litigation, and Congress regarding the CFTC’s role in regulating sports event contracts.

Selig today appeared in front of the U.S. Senate Committee on Agriculture, Nutrition, and Forestry for his CFTC Chair nomination hearing. President Donald J. Trump (R) nominated Selig to chair the CFTC. It was reported in early October that former candidate Brian Quintenz was no longer being considered for the position.

Selig, the current chief counsel of the SEC’s Crypto Task Force and senior advisor to the chair, made it clear during his hearing that he would depend on court opinions to determine the CFTC’s role in regulating the sports event markets.

Will Adhere With Law Regarding Sports Event Contracts

Selig faced several questions from the committee regarding the legality of sports event contracts and a perceived CFTC prohibition regarding contracts related to gaming.

Minnesota Sen. Tina Smith (DFL) said current CFTC regulations “clearly prohibit event contracts related to gaming from being offered.” If confirmed, she asked, can Selig commit to enforcing the prohbition?

The question, Selig said, is a complex one. The nominee said he would depend on court decisions for guidance.

“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.

Selig would answer several questions regarding sports event contracts in the same way during the hearing. California Sen. Adam Schiff (D) asked Selig outright for his personal opinion regarding sports event contracts, asking him to put aside his answer on waiting for court decisions on the issue.

The nominee said it would be irresponsible for him to do so.

“It would be irresponsible for me to pre-judge that issue. I will come into the commission if confirmed with a blank slate and look to the courts,” he said.

Ensuring Safeguards For Sports Event Contracts

New Jersey Sen. Cory Booker (D) pointed to several recent sports betting scandals and the regulated sports betting market’s integrity monitoring safeguards that led to their discovery. It is concerning, he said, that sports event contracts do not have these same safeguards in place to ensure manipulation of the market does not take place.

Booker asked Selig if he would implement any new safeguards to mirror those currently in place through the regulated sports betting market.

Selig said it’s a “core principle” to assure any market the CFTC allow is not susceptible to manipulation.

“But if they’re trading in our markets, if they’re self-certified and the CFTC is allowing them to trade in our markets, it’s of course vital the CFTC ensure those contracts are not being manipulated, are not readily susceptible to manipulation, it’s a core principle.”

CFTC Has Big Say in Sports Event Contracts

Whoever heads the CFTC will have an immediate impact on the way the prediction markets, and especially sports event contracts, are regulated.

Brokerages offerings sports event contracts have long maintained that prediction markets can only be regulated by the CFTC and states have no say in their offerings. Kalshi CEO Tarek Mansour and Kalshi officials have noted their sports event contracts differentiate from traditional sports betting as they are not played “against the house,” but traded between users who purchase contracts on either side of an outcome.

State gaming regulators maintain the markets need to be beholden to regulations, taxes, and license fees that sports betting and gaming operators are required to follow.