The U.S. CFTC is working with major sports leagues across the country to regulate prediction markets, and has sued multiple states to defend federal jurisdiction.

BlockBeats message: On May 12, the chair of the U.S. Commodity Futures Trading Commission (CFTC), Michael Selig, said that regulators are negotiating with all major professional sports leagues in the United States to strengthen oversight of sports prediction markets, with a focus on cracking down on insider trading and market manipulation.

Previously, the CFTC signed a data sharing agreement with Major League Baseball (MLB) in March this year, marking the first time a federal regulator has established formal information-sharing cooperation with a professional sports league. As prediction market platforms such as Kalshi and Polymarket accelerate into the sports event contract sector, conflicts between federal regulation and state gambling regulators are also escalating.

At the FINRA annual meeting, Selig said that the CFTC has filed lawsuits against “about five or six states,” because those states are trying to prevent the operation of event contracts under federal regulation. He emphasized that derivatives regulated by the CFTC fall under federal jurisdiction, not the scope of state gambling laws.

He said that sports prediction markets and traditional gambling are “different products, parallel regulatory systems.” Regarding insider trading, Selig mentioned a case handled by Kalshi: an employee of YouTube influencer MrBeast allegedly used the timing of the release of unpublished content to trade. He also gave an example that if a team trainer or staff member gains advance knowledge of players’ injury information and trades accordingly, it may also constitute insider trading.

Selig said that trading platforms themselves remain the first line of defense, because they are responsible for KYC and AML reviews, which can help identify suspicious trading behavior.

In addition, the CFTC is coordinating with the SEC to study the regulatory framework for ETFs and investment products related to prediction markets. This is seen as yet another signal that, during the Trump administration, the U.S.’ stance toward prediction markets and crypto financial products has clearly shifted toward openness.