May 26, 2026 | Verse Press

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President Donald Trump has publicly endorsed CFTC Chair Michael Selig's drive to establish federal regulatory primacy over prediction markets, calling the effort "critically important" as the agency presses lawsuits against five states that have moved to restrict or ban the platforms. The declaration marks a clear signal that the administration intends to treat prediction markets as federally regulated financial derivatives rather than gambling products subject to state law.

Selig, confirmed as CFTC chairman in December 2025 and currently the only sitting commissioner on the conventionally five-member body, has built his tenure around an aggressive expansion of agency jurisdiction. Prediction markets allow users to buy and sell contracts whose payouts depend on the outcome of real-world events, including elections, economic data releases, and geopolitical developments. Under the Commodity Exchange Act, these products are classified as event contracts and treated as derivatives under federal law. Selig argues that classification means state gambling commissions have no standing to ban or restrict them. "The CFTC will no longer sit idly by while overzealous state governments undermine the agency's exclusive jurisdiction over these markets," he wrote in a Wall Street Journal op-ed. In a separate video statement he added: "To those who seek to challenge our authority in this space, let me be clear: we will see you in court."

The CFTC has now filed suits against Illinois, New York, Arizona, Connecticut, and Minnesota for attempting to apply state gambling laws to prediction market operators Kalshi and Polymarket. Minnesota represents the sharpest state challenge so far: Governor Tim Walz signed a full ban on prediction market activity that takes effect August 1, 2026. State legislators and attorneys general have framed their opposition in consumer protection terms. Minnesota AG Keith Ellison said the platforms "are designed to be addictive and prey especially on young people and low-income folks." Utah Governor Spencer Cox put it more pointedly: "These prediction markets you are breathlessly defending are gambling, pure and simple." Selig has signaled the legal campaign is not finished, telling reporters: "I wouldn't say, just because these are the first states, that they'll be the last."

A Third Circuit Court ruling has bolstered the CFTC's position on jurisdiction, and the agency has filed amicus briefs in a consolidated Ninth Circuit case. In March 2026 the CFTC published an Advance Notice of Proposed Rulemaking soliciting public comment on a formal regulatory framework for event contracts; the comment window closed April 30. The regulatory scaffolding Selig is building extends beyond prediction markets. In March, the CFTC and SEC jointly classified 16 tokens as digital commodities, shifting spot trading oversight to the CFTC in what industry analysts have described as "the single biggest expansion of CFTC authority in the agency's history."

One documented complicating factor runs directly through the administration's posture on this issue. Donald Trump Jr., the president's son, serves as a strategic advisor to Kalshi and holds an investment in Polymarket through his venture capital firm. Critics have raised this conflict-of-interest dimension in coverage of the administration's stance, and it bears directly on the significance of the president's public endorsement of Selig's agenda.

The market context helps explain why the stakes are high. Monthly trading volume across prediction market platforms peaked at $26.75 billion in January 2026, up from roughly $1.2 billion in early 2025. April 2026 total taker volume came in at $8.6 billion, with Kalshi recording $5.42 billion (a new all-time high for the platform) and Polymarket registering $1.99 billion. Combined open interest across the two platforms stood at $1.11 billion as of May 1, 2026, with Kalshi holding $630.7 million and Polymarket $449.9 million. Together, the two platforms account for an estimated 85 to 95 percent of total industry volume. That rapid growth has also drawn scrutiny beyond the state-level policy debate: a U.S. Army soldier was charged with using classified information to trade on prediction markets, and a video editor for YouTube creator MrBeast was suspended after suspicious trading patterns on Kalshi came to light. State regulators have pointed to cases like these as concrete examples of the consumer protection and market integrity risks they argue the platforms present.

That volume growth has not gone unnoticed beyond American borders, and the regulatory response across major markets is moving quickly and in directions that are far from uniform.

India's Ministry of Electronics and Information Technology issued ISP-level blocking orders against Polymarket on May 21, 2026 and against Kalshi days later, citing the Promotion and Regulation of Online Gaming Act 2025 (PROGA). PROGA came into force on May 1, 2026, just three weeks before the blocking orders, and reclassified prediction markets as illegal money games. India's broader digital asset environment reinforces how distant regulatory normalisation remains: the country imposes a 30 percent capital gains tax on crypto profits, a 1 percent tax deducted at source on transactions, and parliamentary discussions have raised sustained concerns about capital flight. Both platforms initially continued accepting Indian registrations, prompting MeitY to also warn VPN providers.

In Nigeria and South Africa, Luno, one of Africa's most-used crypto platforms, launched prediction market products in March 2026 in partnership with Limitless, bringing short-term event-based trading to millions of retail users in a regulatory grey zone. Nigeria's Lagos State gaming authority had already flagged Bayse Markets, a local prediction platform, as an illegal operator in 2025. South Africa's Financial Sector Conduct Authority has issued more than 138 crypto service provider licences under its 2022 FAIS classification of crypto assets as financial products, but legal analysts at ENS Africa identify prediction markets as a specific regulatory fault line, sitting uneasily at the intersection of derivatives law, crypto asset rules, and exchange control requirements, with no specific guidance issued yet.

The outcome of the federal-state court battles will matter well beyond U.S. borders. If Selig's framework survives judicial scrutiny, the CFTC model of treating prediction markets as regulated financial derivatives rather than gambling products could become a de facto global template, influencing how jurisdictions actively building digital asset governance frameworks define and govern the sector. Kenya, which signed its Virtual Asset Service Providers Act in October 2025, and Nigeria, where the VARA framework is actively taking shape, offer two live examples of countries whose eventual approach to prediction markets may be shaped in part by the precedent the CFTC sets. Developers building on Polymarket's Gnosis-based infrastructure or similar on-chain settlement layers will watch the CFTC ANPRM response closely; the resulting rules will likely define the compliance baseline for any permissioned prediction market product seeking access to regulated markets. The next major milestone will be the Ninth Circuit ruling on the consolidated state cases.