Lawyer Says CLARITY Act Could Give CFTC Power to Regulate Prediction Markets

A House subcommittee hearing this week examined how the Commodity Futures Trading Commission might oversee prediction market platforms, with one attorney arguing that pending crypto legislation could hand the agency the authority it needs.

Lawyer Points to Staffing and Authority Gaps

During Tuesday’s hearing before the House Agriculture Committee’s Subcommittee on Commodity Markets, Digital Assets, and Rural Development, Katten Muchin Rosenman partner Carl Kennedy said the CFTC currently lacks the staff to fully regulate and enforce rules against prediction market companies like Kalshi and Polymarket. Kennedy said the CLARITY Act, still under Senate consideration, could give the agency expanded authority to handle both digital assets and the rapid growth of prediction markets, and suggested the commission should receive additional resources to manage these emerging asset classes.

CFTC Chair’s Jurisdiction Claims Draw Pushback

The hearing comes amid ongoing controversy over CFTC Chair Michael Selig’s stance that the agency holds exclusive jurisdiction over prediction market platforms, arguing that event contracts qualify as swaps under federal oversight. Selig, the only Senate-confirmed member currently on the CFTC’s leadership panel, has faced criticism from Democratic senators who describe his approach as undermining state regulatory authority. Last week, he directed Kalshi to disregard a Michigan court ruling, a move the company said left it caught between conflicting state and federal directives. Some legal experts believe the dispute could eventually reach the Supreme Court.

Bill Text Still Pending

Republican senators pushing for a vote before the August recess say the CLARITY Act’s text should be released soon, though details on how it addresses prediction markets, ethics provisions, and related concerns remain undisclosed. Gambling industry groups petitioned the Senate in June to explicitly prohibit event contracts tied to sports and casino style gaming within the bill. Separately, the White House confirmed it agreed to what it called the most comprehensive ethics provision in history as part of ongoing negotiations with Democrats.