CFTC Short-Staffed for Prediction Market Oversight, Ex-Lawyer Says

A U.S. House hearing on July 21 placed the Commodity Futures Trading Commission's staffing and legal authority at the center of the debate over sports prediction markets. Lawmakers on the House Agriculture Subcommittee on Commodity Markets, Digital Assets, and Rural Development met to examine customer protection and market integrity in event contracts. Carl Kennedy, a partner at Katten Muchin Rosenman and a former CFTC lawyer, told the panel the regulator may be too "short-staffed" to oversee platforms such as Kalshi and Polymarket while taking on broader duties.

Kennedy pointed to the Digital Asset Market Clarity Act, or CLARITY Act, and said the CFTC would need more resources if Congress expands its authority over digital assets while prediction markets continue their "explosive growth." His written testimony argued that the Commodity Exchange Act already gives the CFTC a framework for regulating event contracts on registered exchanges. Trading volume across CFTC-registered prediction markets exceeded $25 billion in 2025. On one major platform, average daily event-contract listings rose from about 1,600 in April 2025 to roughly 162,000 in April 2026.

Kennedy told lawmakers that more legal authority would need to come with enough staff and funding. "With additional resources," he said, the CFTC could address new digital asset markets while also dealing with the growth of prediction markets. The CFTC already oversees registered derivatives exchanges under federal law. Kennedy said those exchanges must follow rules covering market surveillance, financial integrity, customer protection and controls against manipulation. He argued that those requirements can also apply to sports event contracts.

The wider dispute centers on whether sports contracts count as federally regulated derivatives or gambling products that states can restrict. CFTC Chair Michael Selig has defended what he calls the agency's "exclusive jurisdiction" over federally regulated prediction markets. The CFTC received more than 1,500 comments on its prediction market rulemaking earlier this year. Kalshi and Polymarket backed federal oversight, while several state gambling regulators argued that sports event contracts should remain under state gaming laws.

The conflict has escalated in recent weeks. The CFTC blocked Kalshi from unwinding certain Michigan sports event trades after a state court ordered the platform to stop offering the contracts. Kalshi said the conflicting orders placed it in an "impossible position" between federal and state requirements. A Washington state ruling added another court setback. On July 20, a judge granted a preliminary injunction after finding that Washington was likely to succeed in its claim that Kalshi's sports contracts violate state gambling laws. The order is set to take effect no earlier than Aug. 5 while the court considers further submissions.