Senators urge CFTC to avoid intervening in prediction-market lawsuits

Twenty‑three senators from both parties formally asked the Commodity Futures Trading Commission to stand down from active participation in pending state and tribal lawsuits over event‑based trading platforms and to consider prohibiting certain categories of contracts, such as sports and violent‑activity outcomes. The letter frames the issue as one of preserving local consumer protections and sovereign authority, arguing some products resemble gambling and escape state oversight. The request lands against a backdrop of shifting federal posture: the CFTC under new Chair Mike Selig has rescinded a 2024 rulemaking notice and a staff advisory, reframing its approach to pursue a statutes‑grounded, rules‑based process and signaling closer coordination with the SEC. State and tribal enforcement, however, has continued: a Nevada court temporarily barred Polymarket from serving state residents for 14 days and set a preliminary‑injunction hearing for Feb. 11, 2026, while a Massachusetts judge ordered a 30‑day suspension of sports contracts — measures that illustrate how courts can impose immediate, localized restrictions. Firms are litigating aggressively: Kalshi faces nearly two dozen federal suits and has mounted both federal appeals and expanded lobbying and policy hires in Washington as it seeks national clarity. Regulators and judges have raised practical concerns about underage access, betting integrity and apparent large, time‑sensitive trades that some fear resemble insider wagering; on‑chain records have in some cases amplified those concerns by making trade timing and behavior transparent. Market operators and liquidity providers are preparing for a mixed future — implementing geofencing, enhanced KYC, trade‑monitoring and, in some cases, delisting U.S. customers for certain products — while pushing for federal rules that could standardize clearing and reporting. Commercial entrants from gambling companies and partisan platforms are accelerating launches that could expand market size, even as litigation and rulemaking create operational and compliance risk. The senators’ letter adds political pressure to the debate, reinforcing state‑level defenders of consumer protections and revenue streams while complicating the CFTC’s engagement with industry stakeholders and advisory councils. Absent a court or congressional resolution, expect ongoing parallel litigation, phased administrative rulemaking, and tactical shifts by firms balancing near‑term revenue against long‑term access to U.S. customers.