Who should regulate prediction markets? Senators push Clarity Act changes

The hearing highlights an expanding legal fight over where federal derivatives regulation ends and state gambling authority begins. CFTC Chair Michael Selig has argued the agency holds "exclusive jurisdiction" over prediction markets. The Trump administration has backed that stance, calling federal oversight "critically important." States have pushed back. Attorneys general from 44 states urged the CFTC in June to withdraw and rewrite its proposed Rule 40.11, arguing the agency exceeded its authority under the Commodity Exchange Act by moving into sports gambling oversight.

Senate Agriculture Committee Chair John Boozman, R-Ark., expressed sympathy for tribal concerns but questioned whether the Clarity Act or Farm Bill were the right vehicles. "The problem there is that you're conflating issues," Boozman said. "I don't think those things are going to happen. I think you run into the same problem with Clarity in the sense that crypto is not prediction markets, so I think you've got to build your case. I'm very sympathetic. I want to help you."

Trading activity on prediction market platforms has surged even as the regulatory debate continues. Kalshi and Polymarket's two platforms generated a combined $50.59 billion in notional trading volume during July, the highest monthly total on record for the three businesses, according to crypto.news. Kalshi accounted for roughly $37.7 billion, or about 74.5% of the combined volume. Polymarket US recorded the fastest monthly growth after expanding access to eligible U.S. users, while activity on Polymarket's international platform declined.

Open interest across the three exchanges fell from roughly $2 billion at the start of July to around $1.2 billion by month-end, crypto.news reported. The decline followed the settlement of positions tied to the FIFA World Cup after the tournament's conclusion.