17 senators push to block CFTC funding for prediction market suits

Seventeen Democratic senators are seeking to cut off the Commodity Futures Trading Commission's litigation funding, escalating a battle over whether states or the federal government control the fast-growing prediction market industry.

The CFTC has sued nine states and tribes over prediction market enforcement since January, but a bloc of Senate Democrats now wants to bar the agency from spending taxpayer money on those fights — a move that could reshape who regulates the $17 billion-a-day industry.

"Through engaging in this campaign of litigation and intimidation, the CFTC risks becoming an instrument and enabler of online prediction markets' efforts to bypass states' consumer protections and oversight, creating a race-to-the-bottom in gambling," the senators wrote in a June 24 letter to the Senate Appropriations Subcommittee on Financial Services and General Government.

The letter, led by Senators Richard Blumenthal of Connecticut and Jeff Merkley of Oregon and signed by 15 other Democrats, targets language in the FY2027 appropriations bill. It would prohibit the CFTC from using federal funds to prevent states and tribes from enforcing their gambling laws against platforms such as Kalshi and Polymarket. The agency, operating under sole Commissioner and Chair Michael Selig, has filed suits against Connecticut, Illinois, Arizona, Kentucky, Wisconsin, New York, Minnesota, Rhode Island and New Mexico since January.

The outcome carries billions in implications. Kalshi alone processed more than $17 billion in volume during the first two weeks of the 2026 FIFA World Cup, with daily fees topping $10 million, according to Ticker Tracker data. If the senators succeed, state gaming authorities would retain oversight, potentially throttling platforms that have positioned themselves as federally regulated exchanges. If the CFTC prevails, prediction markets could expand under a single national framework — but the legal uncertainty may persist until one of the pending cases reaches the Supreme Court.

A Regulatory Patchwork Takes Shape

The dispute centers on whether event contracts — wagers on outcomes ranging from sports scores to election results — qualify as "swaps" under the Commodity Exchange Act, giving the CFTC exclusive jurisdiction, or as gambling, which states have regulated since the 2018 Supreme Court ruling in Murphy v. NCAA that struck down the federal ban on sports betting.

Kalshi and Polymarket have filed their own lawsuits backing the CFTC's position, arguing that state-level enforcement creates an unworkable patchwork. In Michigan, a federal judge on June 26 remanded Kalshi's case back to state court, rejecting the exchange's argument that federal law preempts the state's enforcement action. In New Mexico, Kalshi moved to dismiss a tribal lawsuit, asserting that the Indian Gaming Regulatory Act does not extend tribal authority over non-members.

The CFTC's current enforcement campaign marks a sharp escalation from the agency's posture under previous administrations. Before 2025, the CFTC had not sued a single state over prediction market regulation. The agency has now filed at least eight such suits in six months, according to court records. Meanwhile, DraftKings launched its own proprietary prediction markets exchange, DKeX, on June 26, signaling that major sports-betting operators are betting on federal oversight prevailing.

What Comes Next

The Senate appropriations process will determine whether the funding restriction becomes law. The CLARITY Act, which would establish separate regulatory roles for the CFTC and Securities and Exchange Commission over digital assets, is also pending before the Senate. Gaming organizations have petitioned lawmakers to add language barring sports event contracts from the bill, arguing the CFTC was not created to regulate wagers.

"The CFTC's current leadership is pursuing an aggressive litigation strategy without a full commission," said James Okafor, macro policy analyst at Edgen. "If the funding restriction passes, it would effectively halt new lawsuits and force the agency to negotiate with states — or wait for the Supreme Court to resolve the jurisdictional question."

The House has also advanced the Stop Lawmakers From Predicting Act (H.R. 9367), which would ban members of Congress and their families from trading prediction market contracts tied to government policy or political outcomes. That bill cleared the House Administration Committee on a 5-4 vote June 26 and now awaits a full House vote.

This article is for informational purposes only and does not constitute investment advice.