The Commodity Futures Trading Commission’s (CFTC) push to rewrite the rules governing prediction markets is unlikely to rescue sports event contracts from mounting legal challenges and could instead give opponents another avenue to sue the regulator, according to Better Markets policy director and COO Amanda Fischer.
Speaking on the Indian Gaming Association’s The New Normal webinar, Fischer argued that CFTC Chairman Michael Selig’s rulemaking drive amounts to an attempt to strengthen the federal case for prediction markets after platforms suffered damaging setbacks in court.
“The rulemaking, I mean, it’s just — they’re throwing the kitchen sink at it to try to shore up their legal case in court and basically confuse judges about what the law has been for, you know, 15 years longer,” Fischer said.
She described the effort as a “feeble attempt” to redefine gaming in a way that excludes sports and other products from restrictions on event contracts.
It’s a feeble attempt to try to shore up an area where they are overwhelmingly losing in court. – Amanda Fischer, Better Markets COO
Her comments come after a major defeat for prediction market operator Kalshi in Utah. On August 4, US District Judge Robert Shelby ruled that the Commodity Exchange Act does not preempt Utah from enforcing its anti-gambling laws against Kalshi, granting summary judgment to the state. The ruling rejected a central argument advanced by prediction market operators: that CFTC oversight of federally regulated derivatives exchanges prevents states from applying their gambling laws to event contracts.
CFTC is rewriting gaming rules as prediction markets lose in court
The CFTC has taken an increasingly assertive position under Selig. In March, the regulator began a new prediction-market rulemaking process while stating that it would exercise “exclusive jurisdiction” over the markets. In June, it proposed amendments to Regulation 40.11, including a new framework for determining whether contracts involve activities listed in the Commodity Exchange Act, such as gaming, war, terrorism and assassination.
The June proposal also seeks to define terms including “gaming,” which appears to be central to the current dispute.
Fischer argued that the agency was trying to reinterpret a regulatory framework that had been understood for years to cover sports betting and other forms of gaming.
“They go in and they take something that the whole world has understood for 14 years to be pretty clear,” Fischer said, arguing that the agency is now effectively claiming that “gaming” should be more narrowly understood.
She suggested the strategy as an effort to signal to judges that the law is more ambiguous than opponents of prediction markets contend.
Rocha called the process “backfilling,” arguing that the CFTC appeared to be preparing its position for future court battles and potentially an eventual Supreme Court fight.
Fischer agreed that the timing matters, but said rulemaking is not where the underlying dispute will ultimately be decided.
“The rulemaking is important. Better Markets engaged on it, but it’s not the main show,” she said. “The main show is what’s happening in the courts.”
“If I had to pick a side that I thought would win in court when this is all settled, it would be your side,” Fischer told the IGA hosts.
Better Markets analyst says new CFTC rules could give opponents another route to sue
Rather than insulating prediction markets from litigation, Fischer said a final CFTC rule could itself become the subject of a court challenge.
She pointed to opposition submitted during the rulemaking process from tribes, states and attorneys general, arguing that the CFTC will have to demonstrate that its final decision is legally grounded, economically justified and not arbitrary or capricious.
“It’s going to be really, really difficult for them to finalize the rule in a way that checks all of the boxes that the court has established for reasoned rulemaking,” Fischer said.
“This rule is highly vulnerable to challenge from folks with standing to do so. So it opens up a whole new set of procedural infirmities that a challenger could also approach.”
The argument builds on Better Markets’ campaign against federal preemption of state gambling regulation. In April, the financial reform advocacy organization filed an amicus brief supporting Massachusetts in its dispute with prediction market operators, arguing that Congress never intended the CFTC to become a national gambling regulator.
Massachusetts has already secured a preliminary injunction requiring Kalshi to comply with state sports gaming laws if it wants to accept sports wagers from customers there. Attorney General Andrea Joy Campbell’s office said the January order prohibited Kalshi from accepting online sports wagers and related event contracts in Massachusetts without complying with state requirements, including licensing by the Massachusetts Gaming Commission.
Better Markets has argued that prediction platforms function more like gambling businesses than traditional derivatives markets and that states are better equipped to police problems including gambling harms and potential market abuse.
Prediction markets may have weakened their case by moving into sports early
Fischer said the industry had weakened its own legal position by launching sports contracts before securing a clearer regulatory framework.
She argued that prediction market companies could have waited for the CFTC to rewrite its rules before entering sports, which would have provided a more defensible — although, in her view, still vulnerable — position.
“If the prediction markets — I don’t think that this is lawful and I don’t think it’s a good idea — but if they wanted to be greedy, but be more responsibly greedy,” Fischer said, they would have avoided sports contracts until after the rulemaking.
Instead, she said, operators effectively chose to “ask for forgiveness, not permission.”
Waiting could have taken as long as two years, she added, depriving companies of sports-related revenue during a crucial period.
“The rulemaking thing is like, it’s a CYA for the CFTC. It’s backfilling, as you said,” Fischer said. “If they were just a little more patient, they maybe could have had a more durable strategy. But again, even then, I think it would have been on thin ice.”
Clarity Act faces dwindling chances of clearing the Senate
The regulatory fight is unfolding as the crypto industry struggles to secure legislation from Congress.
Fischer described the Clarity Act as particularly significant because it would reopen the Commodity Exchange Act and shift substantial authority toward the CFTC. She argued that crypto and prediction markets are closely intertwined through investors, platforms and business strategies.
With congressional legislation uncertain, Fischer suggested federal agencies are increasingly trying to achieve through regulation what industry supporters have so far failed to lock in through statute.
She characterized the current moment as the “second half” of the industry’s political campaign.
“They’re doing increasingly novel, strange gambits in the courts and through the rulemaking apparatus to try to just grasp at anything they can to get the most done by the midterms and by the end of President Trump’s term,” Fischer said, arguing that the objective was to “future proof their business model” against less sympathetic regulators or Congresses.
Fischer predicted that an expected Senate cloture vote on the Clarity Act would fail to reach the 60 votes needed to proceed, pointing to unresolved disagreements over crypto regulation, banking, law enforcement and the extent of the powers being handed to the CFTC.
IGA Chairman David Z. Bean was similarly pessimistic.
“When they closed out, you know, they didn’t have enough votes to pass the Clarity Act, and I don’t think they will,” Bean said, adding that tribal representatives would return to Washington when Congress reconvenes to ensure lawmakers know that “Indian country is watching.”
The comments follow Bean’s previous criticism of congressional inaction over prediction markets. In a February appearance on The New Normal, he said lawmakers privately recognised the legal concerns surrounding the sector but were reluctant to act publicly.
“One-on-one in their office, in a safe space, they’re going to tell you it’s a problem, but that’s where it ends,” Bean said at the time.
SEC action cannot deliver the protections crypto wants from Congress
The CFTC is not the only regulator pursuing an aggressive rulemaking agenda while Congress remains deadlocked.
SEC Chairman Paul Atkins has made crypto reform a central regulatory priority. The SEC’s 2026 agenda says the regulator is working on clearer rules for crypto fundraising, custody and tokenised securities, with Atkins saying the commission wants to bring more products onshore while reducing regulatory barriers.
Atkins has also floated bespoke exemptions for crypto fundraising, including a potential startup exemption and a broader fundraising exemption, as well as an “investment contract safe harbor.”
Fischer argued that regulatory action cannot provide the crypto industry everything it could obtain from legislation.
“Absent the Clarity Act and actually getting a change in law, I don’t think that the changes that they’re doing are going to end up being that durable or useful,” she said.
In particular, Fischer said the SEC cannot use rulemaking to deliver comprehensive immunity for earlier conduct or eliminate lawsuits brought by private plaintiffs and states.
“The SEC also can’t waive private plaintiff lawsuits and state lawsuits,” she said. “So it’s not great. But it’s also not going to be that durable, depending on the next SEC.”
Prediction markets are proving more politically divisive than crypto
Fischer also argued that prediction markets have become substantially more politically difficult for the administration than crypto.
While crypto has attracted support from Republicans and some Democrats, sports event contracts directly collide with state gambling regimes and tribal gaming compacts, creating opposition among lawmakers who might otherwise support the administration’s broader digital asset agenda.
“Prediction markets is very different,” Fischer said. “You actually have a huge split within the Republican caucus of legislators that know their communities and know their state Republican officials, their law enforcement officials, and they don’t like this, and they don’t like sports gaming taken out of their state and tribal jurisdiction.”
She pointed to bipartisan opposition aired during a Senate Indian Affairs Committee roundtable as evidence that prediction markets have become harder for the White House to embrace politically.
The CFTC, meanwhile, has doubled down on its federal jurisdiction argument. It has intervened in litigation around the country and in May sued Minnesota to block a state law targeting prediction markets. The agency has also participated in disputes involving Connecticut, Illinois, New York, Nevada and Massachusetts.
State penalties threaten the economics of prediction markets
Fischer said one of the biggest emerging threats to prediction market operators is whether states can recover money or impose penalties for activity that occurred before a final legal resolution.
“The play for the prediction markets, and it’s not stupid, is like, even if the Supreme Court ultimately sides against us, we would have had a good run,” she said.
“We did unregulated sports betting for a couple years and we made a bunch of money on it and we paid out our early investors and, you know, nice to know you.”
But she said the calculation changes dramatically “if there’s disgorgements and penalties for the conduct that occurred during this period.”
“That just turns the temperature way up on the litigation,” Fischer said.
The issue is already becoming concrete. Nevada regulators are seeking daily penalties of $120,000 from Kalshi in a dispute over geofencing, while Kalshi maintains that the state’s enforcement efforts conflict with federal law.
Midterms could trigger wave of CFTC and prediction market investigations
If political control shifts following the midterm elections, Fischer predicted the industry and the CFTC could face another threat: congressional investigations.
She said the unusual amount of scrutiny now surrounding the regulator, combined with allegations involving insider trading and questions over its dealings with prediction market companies, could generate extensive oversight.
“I would not be surprised if there’s not dozens of congressional hearings,” Fischer said, predicting lawmakers could call company executives to testify, issue subpoenas and investigate the relationship between platforms and their federal regulator.
“I think that legislators are going to be tripping over themselves to break stories on this ground,” she added.
Fischer went further when discussing the CFTC’s intervention in litigation involving prediction markets, saying she believed the regulator and platforms appeared to be coordinating their legal strategies.
“I cannot think of an example in my career of a federal agency moving so lockstep with firms that are the subject of litigation,” she said.
“If I were Congress, I would definitely try to get my hands on those communications to see just the level of integration between the government’s legal strategy and the prediction market’s legal strategy.”
Fischer did not predict criminal liability for Selig, but said congressional subpoenas, testimony and demands for communications could become significant if lawmakers decide to investigate.
Ultimately, she argued that the Supreme Court’s own recent approach to administrative power could make the CFTC’s strategy especially vulnerable.
“Agency rulemaking is powerful,” Fischer said, but courts have increasingly rejected federal agencies’ attempts to adopt novel interpretations of longstanding statutes.
“Going by the logic of the Supreme Court in the last like five, 10 years, what the CFTC is doing with this rulemaking should be outside the bounds,” she said. “The court should not defer to novel interpretations of long standing law and novel ways of redefining what gaming is.”
For an agency betting that new rules can strengthen prediction markets in court, Fischer’s warning was that the rulemaking designed to rescue them could instead become another front in the legal war.
Featured image: Canva AI-generated
