Commodity Futures Trading Commission Chairman 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 if it’s sports or politics or anything else, if it’s a validly offered product within a CFTC-regulated exchange, then we regulate that,” Selig said.
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NASHVILLE, Tenn. – The Commodity Futures Trading Commission is just defending its turf by suing states for prediction markets, the regulator’s official told CoinDesk.
CFTC Chairman Mike Selig, speaking on the sidelines of the Digital Assets and Emerging Technologies Summit Monday hosted by Vanderbilt University and the Blockchain Association, said the agency’s lawsuits against Arizona, Illinois and Connecticut show “very clearly…that the CFTC has exclusive regulatory authority with respect to commodity derivatives markets.”
Selig, who will speak at CoinDesk’s Consensus conference in Miami next month, said Monday’s ruling by the Third Circuit Court that the CFTC must oversee prediction markets reinforced his agency’s view.
Under Selig, the CFTC embarked on a major litigation effort to bolster prediction markets’ arguments that they provide derivatives under the Commodity Exchange Act, rather than state-regulated gaming services.
“Our view is that the law is very clear: When you offer a swap on a federally regulated designated contract market, that transaction, those transactions, are subject to federal regulation,” he said. “It doesn’t matter if it’s sports, politics, or anything else; if it’s a product validly offered within a CFTC-regulated exchange, then we regulate it, and states do not have the ability to override federal oversight and override gambling laws where derivatives laws apply.”
When asked why the CFTC hadn’t sued Nevada or Massachusetts – two states that have successfully obtained preliminary injunctions against prediction market providers – Selig responded: “I wouldn’t say, just because they’re the first states, that they’ll be the last.” »
He noted that the CFTC has filed an amicus brief in a consolidated case before the Ninth Circuit Court of Appeals, which will be heard next week. The Ninth Circuit includes Nevada.
Dodd-Frank exchanges
Under the Dodd-Frank Act, the CFTC can regulate swaps and block certain types based on whether they are in the public interest. These categories include war, terrorism, assassinations, gaming, any other illegal activity, or “any other similar activity.”
Selig said the main problem is that under the law, the CFTC decides whether a product is contrary to the public interest. The lawsuits it is engaged in focus on this aspect, regardless of the events underlying the contracts.
“Even though these underlying categories, whether it’s war terrorism, assassinations, gaming, etc., even if we have to do a public interest analysis, or if we choose to do a public interest analysis, that doesn’t mean that it’s not within our exclusive regulatory authority,” he said. “And so that’s what these cases are about, and that’s what we’re fighting for.”
The CFTC is currently undergoing a formal rulemaking process to clarify its oversight of prediction markets.
“We are open to suggestions on what this process should look like and how to evaluate it,” he said. “We are certainly considering that provision of the Dodd-Frank Act.”
Interpretive advice
Outside of prediction markets, Selig said the CFTC would consider any comments on the final interpretation it issued to the Securities and Exchange Commission last month.
“To the extent that we receive feedback on certain things that we might change or need to reconsider, we certainly will,” he said.
More importantly, he added, creating a taxonomy means that if a company wants to self-certify a futures product tied to a digital asset, the CFTC and SEC can simply rely on their advice to ensure that the token is not a security.
“To the extent that you have a token security, we don’t object to the CFTC claiming it’s a commodity or the SEC claiming a different type of commodity as a security,” he said. “We have clear lines in the statute.”
The guidance was intended to be comprehensive, so businesses and agencies had examples, he said.
“We should be very aligned across agencies,” he said.
Monday
- 1:00 p.m. UTC (9:00 a.m. ET) SEC Chairman Paul Atkins will speak at the IMF-IOSCO Emerging Technology Conference.
THURSDAY
- 2:00 p.m. UTC (10:00 a.m. ET) The House Agriculture Committee will hold a hearing with CFTC Chairman Mike Selig. There aren’t many details about what the hearing was about – it just says it was “for the purpose of receiving testimony.”
- 4:00 p.m. UTC (9:00 a.m. PT) A panel of the Ninth Circuit Court of Appeals will hear arguments in a consolidated set of cases involving prediction markets and state regulators. The CFTC has filed an amicus brief in this case and will also speak at oral arguments.
If you have any ideas or questions about what I should discuss next week or any other comments you’d like to share, feel free to email me at nik@PK Press Club.com or find me on Bluesky @nikhileshde.bsky.social.
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See you next week!
