Chairman of the Commodity Futures Trading Commission, 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 whether it’s sports, politics or anything else, if it’s a valid product offered within a CFTC-regulated exchange, then we regulate it,” Selig said.
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NASHVILLE, Tenn. — The Commodity Futures Trading Commission is just defending its territory in 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 Tech Policy Summit hosted by Vanderbilt University and the Blockchain Association on Monday, said the agency’s lawsuits against Arizona, Illinois and Connecticut make it “very clear … that the CFTC has exclusive regulatory authority when it comes to commodity derivatives markets.”
Selig, speaking at CoinDesk’s Consensus Miami conference next month, said Monday’s Third Circuit Court ruling that the CFTC must oversee prediction markets strengthened his agency’s view.
Under Selig, the CFTC has launched a major litigation effort to bolster the prediction markets’ arguments that they provide derivatives products under the Commodity Exchange Act, rather than gambling services regulated by states.
“Our view is that the statute is very clear that when you offer a swap in a federally regulated designated contract market, the transaction those trades are subject to federal regulation,” he said. “It doesn’t matter if it’s sports, politics or anything else; if it’s a valid product offered within a CFTC-regulated exchange, we regulate it, and the states don’t have the ability to nullify federal oversight and replace gambling laws where derivative laws apply.”
Asked why the CFTC didn’t sue Nevada or Massachusetts — two states that have successfully secured preliminary injunctions against prediction market providers — Selig said that “I wouldn’t say just because these are the first states that they’re going to be the last.”
He pointed out that the CFTC filed an amicus brief in a consolidated case before the Ninth Circuit Court of Appeals that will be heard next week. The Ninth Circuit includes Nevada.
Dodd-Frank switches
Under the Dodd-Frank Act, the CFTC can regulate swaps and can block certain types based on whether they are in the public interest. These categories include war, terrorism, assassination, gambling, anything else illegal, or “other similar activity.”
Selig said the main problem is that the CFTC, by law, decides whether a product is contrary to the public interest. The lawsuits it is involved in are focused on that aspect – regardless of the events underlying the contracts.
“Even if these categories of underlying elements, whether it’s war terrorism, assassination, gaming and so on and so forth, even if we have to do a public interest analysis or we choose to do a public interest analysis, that doesn’t mean it’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 in 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 in the Dodd-Frank Act.”
Interpretive guidance
Outside of the prediction markets, Selig said the CFTC would review any comments on the final interpretation it released with the Securities and Exchange Commission last month.
“To the extent that we get feedback on certain things that we can change or need to rethink, we will certainly do that,” he said.
More importantly, he said, the creation of a taxonomy means that if a company wants to self-certify a futures product tied to a digital asset, the CFTC and SEC can just look to their guidance to make sure the token is not a security.
“To the extent that you have a tokenized security, we don’t bat an eye at the CFTC claiming it’s a commodity or the SEC claiming another type of commodity as a security,” he said. “We have drawn clear lines in the statute.”
The guidance was intended to be comprehensive so that both the companies and the agencies had examples, he said.
“We should be very much aligned across agencies,” he said.
Monday
- 13:00 UTC (9:00 am ET) SEC Chairman Paul Atkins speaks at the IMF-IOSCO Conference on Emerging Technologies.
Thursday
- 2:00 PM UTC (10:00 AM ET) The House Agriculture Committee will hold a hearing with CFTC Chairman Mike Selig. There aren’t many details on the subject of the hearing — it just said it was “for the purpose of receiving testimony.”
- 4:00 p.m. UTC (9:00 a.m. PT) A Ninth Circuit Court of Appeals panel will hear arguments in a consolidated set of cases surrounding prediction markets and state regulators. The CFTC filed an amicus brief in this case and will also speak during the arguments.
If you have thoughts or questions about what I’ll be discussing next week or any feedback you’d like to share, feel free to email me at [email protected] or find me at Bluesky @nikhileshde.bsky.social.
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See you next week!
