The Commodity Futures Trading Commission (CFTC) had a busy summer. Within the space of a month in July and August, it issued five letters or emergency orders that were all specifically focused on prediction markets — a big change from an agency that was once almost silent about the rising products.
The agency told prediction markets to stop using American-style odds, to ensure that their incentive programs were not misleading and were available to all who qualified, and to make their self-certifications of new markets less broad.
It went a step further with two emergency orders, telling Kalshi to defy a court order that was granted in Michigan and another that was under consideration in New York. Explaining the emergency orders, the CFTC argued that making Kalshi unwind certain trades in Michigan or stopping it from offering any event contracts in New York would damage the integrity of the event contracts market as a whole.
Are the moves a serious sign that the CFTC actually cares about order in its markets and will genuinely take steps to regulate them? Or are they a ploy to win courtroom battles?
The answer probably depends at least a little on your preexisting views about whether the CFTC has any right to be a nationwide sports betting regulator.
“If you want to show that these markets are legitimate, having a federal regulator helps with that,” one analyst of commodity futures regulation told InGame.
“On the other hand if you were concerned about the legitimacy of the CFTC, you might be wondering why they’re spending so much of their time on this.”
Backing their courtroom strategy
Earlier this year, under Chair Michael Selig’s leadership, the CFTC stopped sitting quietly as court cases went on and started taking an active role in the lawsuits instead, sometimes even suing states. If it believes that application of state gambling laws to prediction markets are an intrusion into its jurisdiction, then it follows that it would take actions to show that it sees the products as within its wheelhouse.
“They have to back their strategy of saying that there is federal preemption,” Melinda Roth, professor of Business Associations, Sports Law & Corporate Finance at New England School of Law, told InGame. “So when a state has said ‘you can’t do this’ to one of their platforms, they’re not just putting pressure on the state, they’re also putting pressure on Kalshi to abide by the order. I think it’s not extraordinary but not unexpected.
“When we have innovative financial products, if they’re traded on exchanges that are regulated by the CFTC then they will say, ‘We need to regulate that market. And we need to do it whether we have the experience or the people or not.’”
The analyst of commodity futures regulation says that the ultimate motivation for the moves may be questionable, but the end result of a more on-the-ball regulator is better than the alternative.
“You hear people speculating that they don’t want it to seem like anything goes,” he says. “So you can make the cynical assumption that they don’t care about this stuff, maybe there’s some truth to it.
“But if you look at the stuff they’ve done on the regulatory side, they’re doing what an honest broker should do.”
Staffing cuts a concern
But Benjamin Schiffrin, director of securities policy for Better Markets, told InGame that he was concerned that the already short-staffed CFTC couldn’t spend the resources it takes to be a nationwide sports betting regulator and do the job it was created to do — regulate commodity futures. In a chaotic time for traditional commodities markets, the CFTC’s traditional job risks getting overlooked. Selig has been the sole commissioner for about nine months, and the CFTC staff is 25% smaller than it was in January 2025.
“I think there are a number of risks,” Shiffrin says. “The first is that the CFTC has an incredibly important mission and that is to regulate the $500 billion derivatives market. It is incredibly important that we have a regulator who is on top of that market.
“And then it’s a huge problem if the CFTC convinces people that they’re dealing with a product that isn’t gambling. If people want to gamble, that’s fine, but they should know that they’re getting into.”
Are all the letters and orders really alike?
Though timing groups the CFTC’s letters and emergency orders together, maybe they shouldn’t all be read as one set of actions. David Aron, special counsel at Lowenstein Sandler, told InGame that he sees value in the emergency orders, but not so much the letters around incentives and odds formats.
“It’s a bit of a mix,” he says. “The incentive one seems pretty broad and wide reaching, in an area where DCMs [designated contract markets] have a lot of discretion. Then the odds one just seems like a strange line to draw. Who cares?”
Others agree that the odds letter is the hardest to justify from the perspective of serious regulation.
“It shows how far the CFTC is willing to go to try to pretend that sports event contracts are not gambling,” Schiffrin says. “They’re saying, ‘Help us out, don’t be so obvious about it.’”
“But these emergency orders,” Aron says, “they have some good points. The states could have tried to keep it narrower with their injunctions.”
Many states have petitioned courts for injunctions that would keep prediction markets’ sports contracts out of their states, but the CFTC’s orders focus on two. In Michigan, a state court ordered Kalshi to unwind trades that involved its in-house market making arm. In New York, a proposed injunction would have gone beyond sports and banned Kalshi from offering any kind of event contracts in the state.
It’s not just the states being stubborn
That’s not to say the CFTC isn’t being stubborn on the issue too.
“It’s a little from column A, a little from column B,” the analyst of commodity futures regulation says. “The New York case, the AG is seeking to shut Kalshi down, rather than just ordering it not to offer sports contracts in-state. And the earlier orders said you can let customers trade out, that doesn’t seem to be the case in New York. But the state’s order hasn’t been granted yet. We don’t know what any order that is granted might look like.”
In Roth’s view, the emergency orders are the result of a clash between two sides that assume they are going to get the maximal version of what they want.
“Everybody is trying to go ahead as if they’re going to get what they want,” she says. “The way the Michigan [injunction] was worded forced Kalshi to unwind current contracts. And it could have been worded in a way that prevented them from having to do that.
“So could the emergency orders have been avoided? Yes. But everybody is just flexing their muscles.”
Schriffrin, though, sees things a little differently. A clash of two difficult-to-reconcile viewpoints?Maybe. But a market emergency? Historically, the standard for that has been very high.
“It’s hard to see what the possible market emergency could be,” he says. “The tell is that the last time the CFTC tried to do that was at the end of the Cold War when the U.S.S.R. was trying to manipulate grain prices.
“They’re telling prediction markets to ignore the orders of a court. We have processes in place if people lose in court. What distinguishes our country from lots of other countries is the rule of law.”
Whiplash from 2025
Perhaps part of the confusion about the wave of orders and letters is the sense of whiplash. In 2025, when sports event contracts came along, the CFTC could have done more to either set tight limits on the products or vocally welcome them. Instead, it said almost nothing, allowing the industry to grow but with little clarity on the legal limits.
Now in 2026, there is finally a full-time chair in Selig, but he remains the only commissioner. The CFTC generally operates with five commissioners, with appointees from both parties.
“It has to be suboptimal, because there’s one office doing everything,” Roth says. “But it would be unlikely to change anything that we’re seeing, any rulemaking, any regulatory guidance. If there was a panel of five, three would be Republican, or considered within the Republican box, and two would be within the Democratic box. So you would still get outcomes that align with what the administration wants.”
