A group of 17 Democratic US senators has asked the Senate Appropriations Subcommittee on Financial Services and General Government to stop the Commodity Futures Trading Commission (CFTC) from using federal funds to pursue litigation against state authorities over prediction markets. The push targets CFTC Chair Michael Selig’s defense of the agency’s view that it has “exclusive jurisdiction” over such platforms.
In a Wednesday letter to the chair and ranking member of the subcommittee, Senator Richard Blumenthal, Senator Jeff Merkley, and 15 other Democrats urged Congress to block funding that would support Selig’s legal campaign. The senators argue that the CFTC’s courtroom strategy could enable online prediction markets to sidestep state consumer protections, creating what they describe as a “race-to-the-bottom in gambling.”
Key takeaways
- 17 Democratic senators want appropriators to prevent the CFTC from using federal funds for Chair Michael Selig’s lawsuits against state-level prediction market enforcement.
- The letter criticizes the CFTC’s argument of “exclusive jurisdiction” over prediction markets and the agency’s position that event contracts qualify as “swaps.”
- The CFTC is already involved in prediction market litigation across multiple states, while some affected companies have sued state regulators in support of the CFTC’s theory.
- Potential Supreme Court review could hinge on how the Court applies federal authority and state power, building on its 2018 sports betting decision in Murphy v. NCAA.
Senators challenge CFTC funding amid prediction market lawsuits
The senators’ letter focuses on whether appropriations should underwrite the CFTC’s legal fights against state gaming regulators. Blumenthal and Merkley led the effort, warning that using federal resources for Selig’s litigation could shift outcomes in ways the senators view as harmful to consumer safeguards.
They specifically framed the lawsuits as part of a broader “campaign of litigation and intimidation,” contending that it risks positioning the CFTC as an “instrument and enabler” for prediction markets aiming to bypass state oversight. The concern, as laid out in the letter, is that states’ regulatory and consumer-protection frameworks could be weakened if companies conclude they can trigger federal enforcement that overrides state rules.
According to the letter, the senators are asking subcommittee leadership to block the CFTC from drawing on federal funding for these cases.
Source: Senator Richard Blumenthal letter to Senate Appropriations Subcommittee
Selig’s “exclusive jurisdiction” stance and the “swap” theory
At the center of the senators’ complaint is the CFTC’s legal position. Selig has argued that prediction-market event contracts on certain platforms fall within the CFTC’s mandate because they function as “swaps,” giving the agency what it describes as “exclusive jurisdiction” over the market.
That approach has been controversial because it directly collides with how state regulators view gambling and consumer protection. Several platforms and companies have responded by contesting state actions, and at least some of them have supported the CFTC’s framing by pursuing their own legal challenges.
Earlier coverage from Cointelegraph noted that the CFTC has engaged in legal fights tied to prediction markets involving regulators in Connecticut, Illinois, Arizona, Kentucky, Wisconsin, New York, Minnesota, Rhode Island, and New Mexico as of June. Companies mentioned in the reporting include Kalshi and Polymarket, both of which have filed lawsuits against state authorities.
Cointelegraph: CFTC litigation involving multiple state regulators
Cointelegraph: Kalshi lawsuit supporting the CFTC’s position
What could happen in the courts: from state authority to possible Supreme Court review
The senators’ intervention comes as the prediction market enforcement battle continues at the state and federal levels. The stakes are heightened by commentary from legal analysts that one of the disputes involving the CFTC and state gaming regulators could eventually reach the US Supreme Court.
A key benchmark is the Court’s 2018 decision in Murphy v. National Collegiate Athletic Association, in which the justices held that states have authority to regulate sports betting. If the Supreme Court agrees to hear a case from the current wave of prediction-market litigation, it could revisit the boundaries of state regulatory power in situations involving federal agencies and market structure questions.
Still, readers should note what remains uncertain: Supreme Court review is not guaranteed, and the eventual scope of any high-court ruling would depend on how the legal issues are framed in the case that reaches the docket.
Congress is debating broader regulatory lines as CLARITY advances
The letter also lands in the middle of an active policy debate over how digital assets should be regulated. The senators’ concerns about the CFTC’s role in prediction markets intersect with the Senate’s anticipated vote on the Digital Asset Market Clarity (CLARITY) Act, a bill that would establish separate regulatory responsibilities for the CFTC and the Securities and Exchange Commission over digital assets.
Cointelegraph previously reported that gaming organizations petitioned the Senate to include language barring sports event contracts in the CLARITY Act, arguing the CFTC was not created to regulate such wagers. That political push underscores a core tension: whether certain categories of event-based contracts should be treated as commodities and swaps under CFTC authority, or instead handled through state gaming rules.
Cointelegraph: Gaming organizations petition Congress on CLARITY language
Meanwhile, Selig leads the CFTC as its sole commissioner and chair, directing the agency’s policy agenda. While the CFTC is expected to ultimately include a bipartisan group of five commissioners, Trump had not announced any plan to fill vacancies as of Friday, according to the reporting referenced in the source.
That governance context matters because it affects how quickly any policy disagreements might be reconciled at the agency level. For market participants, it also means that enforcement posture can be closely tied to the leadership structure at the time of litigation.
For now, the most immediate watch item is whether the appropriations subcommittee actually blocks federal funding tied to Selig’s legal campaign, and how courts respond in the active state cases. Separately, the progress of the CLARITY Act—and how lawmakers choose to define the boundary between CFTC jurisdiction and state authority—could determine whether these disputes are narrowed by statute or continue to play out room by room in court.
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