CFTC Chair to Prediction Markets: Get Regulated or Get Rekt (Like FTX)

CFTC Chairman Michael Selig is sounding the alarm on prediction markets, and frankly, he's tired of watching the same movie play out with different characters. If regulators don't get their act together and set some actual rules, this space is heading for an FTX-sized disaster—and everyone's favorite regulator is here to say "I told you so."

"The failure of agencies to actually regulate, to do their job and set policy, is such a disservice to the builders and innovators and everyday Americans who want to access these products," Selig said in an interview. Classic regulatory energy: showing up to the party three years late and wondering why everyone's already drunk.

The CFTC, which apparently has full jurisdiction over prediction markets and derivatives (we're taking their word for it), is desperately trying to prevent history from repeating itself. "We saw FTX and we saw all these implosions of crypto firms. I'm concerned we'll see the same with prediction markets if we keep pushing it offshore into the unregulated space," Selig warned. "We've got to make sure these exchanges come and register here in the United States and that our rules are set up to facilitate fair markets, markets that have investor protections, customer protections, and have real guardrails and rules." Translation: Please, for the love of God, register so we can sleep at night.

Prediction markets like Kalshi and Polymarket have absolutely blown up over the last year, graduating from weird internet corners where people bet on whether aliens exist to full-blown platforms facilitating event contracts for sports, weather, geopolitical chaos, and basically anything else humans are dumb enough to wager on. The surge in volumes—now stretching above $20 billion monthly—has led to valuations that would make even the most bullish DeFi degens blush. Kalshi reportedly doubled its valuation earlier this month when it raised $1 billion at a $22 billion valuation. To the moon, apparently, but make it event contracts.

But here's the thing about printing money: eventually, someone notices, and the scrutiny comes knocking. Both platforms have faced insider trading accusations, which is a fancy way of saying "people with information used that information." Revolutionary, we know. California Governor Gavin Newsom recently signed an executive order prohibiting public officials in the state from using inside information to profit via prediction markets. "Public service should not be a get-rich-quick scheme," Newsom said—words that definitely won't stop anyone.

In February, two Israelis were arrested and charged with allegedly using military secrets to profit on Polymarket. Classy. Meanwhile, states are pushing back in court with the energy of a divorced couple fighting over a dog. Arizona's attorney general filed 20 criminal charges against Kalshi, alleging it's an "illegal gambling operation," and Nevada secured a temporary restraining order banning the platform from offering event contracts there