“State Governments, Hands Off?”... Trump Steps Up to Defend CFTC's Jurisdiction Over Prediction Markets

▲ Virtual assets, prediction markets, cryptocurrency regulation/AI generated image

As U.S. President Donald Trump announced his intention to keep jurisdiction over prediction markets with the U.S. Commodity Futures Trading Commission (CFTC), the regulatory battle surrounding Polymarket and Kalshi is escalating into a direct clash between state and federal authorities.

According to CoinGape, a cryptocurrency specialized media outlet, on May 27 (local time), Trump stated that prediction market regulation should be handled at the federal level. Trump argued that the U.S. Commodity Futures Trading Commission should maintain exclusive authority over prediction markets and that these markets should be allowed to grow.

Trump wrote on Truth Social, “It is very important that the CFTC's exclusive authority over prediction markets is maintained and that prediction markets flourish.” He also explained that the administration is developing “gold standard” rules that will serve as a benchmark for each state. He further stated that the U.S. is currently the world's hub for cryptocurrency and Bitcoin (BTC), and while other countries are trying to seize that status, the U.S. will not allow it.

These remarks came shortly after Polymarket and Kalshi received unfavorable rulings in court. The Ninth Circuit Court of Appeals denied the two companies' emergency requests to temporarily halt gambling-related lawsuits filed in Nevada and Washington states. The court determined that there was insufficient likelihood of success for either side's argument that the dispute should be heard in federal court rather than state court.

Polymarket and Kalshi have argued that contracts on their platforms fall under CFTC jurisdiction and should be exempt from state-level enforcement. However, Nevada authorities raised concerns that the two companies did not hold state gambling licenses, and Washington authorities claimed that Kalshi sold illegal sports-related betting products. The appellate court ruled that lawsuits cannot be automatically moved to federal court merely by asserting a defense under the Commodity Exchange Act, and it also rejected Polymarket's claim that it complied with federal regulatory obligations.

A U.S. House committee has also launched an investigation into alleged insider trading involving Polymarket and Kalshi. The governments of Indonesia and India have also moved to crack down on Polymarket. Previously, a New Jersey appellate court sided with Kalshi in a lawsuit related to sports event contracts, but other state courts, including Maryland, Ohio, and Nevada, have recently issued rulings favorable to state gambling authorities. In his statement, Trump mentioned CFTC Chairman Mike Selig, commending him for “doing a great job.”

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