Caroline Pham, acting chair of the Commodity Futures Trading Commission (CFTC), has indicated that prediction markets operating through designated contract markets (DCMs) are acting within the bounds of current law.
The commentary, which was detailed by Dustin Gouker and The Closing Line, offers what amounts to the agency’s most explicit acknowledgment yet of prediction markets’ legitimacy, as several states advance efforts to ban or restrict them.
Her comments came in response to questions from Sen. Catherine Cortez Masto. She, along with six other senators, wrote to the CFTC in September seeking clarity on why sports-related contracts were being permitted under the agency’s framework.
Pham repeatedly referred lawmakers to Staff Letter No. 25-36, in which the CFTC formally acknowledged the existence of sports event contracts.
She explained that any investigations into such markets remain confidential, citing longstanding policy on non-public enforcement matters.
Her stance has highlighted a tension between emerging market structures and the patchwork of federal and state rules governing gambling and derivatives.
In their letter, lawmakers also pressed Pham on how the CFTC ensures that athletes, referees, team personnel and other insiders cannot manipulate event outcomes, and how anti-manipulation rules are enforced within sports event contract marketplaces.
In its written response, the CFTC said all DCMs must comply with 23 Core Principles under the Commodity Exchange Act (CEA), including those tied to market integrity and participant protection.
Division of Market Oversight maintains regulatory control
Oversight of the sector is led by the CFTC’s Division of Market Oversight, which evaluates compliance with core provisions such as preventing market disruption and enforcing disciplinary procedures.
The agency conducts rule enforcement reviews, issues formal information requests under regulation 38.5, and holds quarterly oversight calls with exchanges.
The CFTC was also asked how it ensures that operators comply with geolocation rules, Know Your Customer procedures, anti-money laundering standards and problem gambling safeguards.
To this, the Commission drew a clear distinction between its responsibilities and those of other federal authorities.
Pham stated that the agency has no enforcement authority under the Federal Wire Act, leaving such matters outside its remit.
That legislation has previously been used to thwart online gambling initiatives, most notably bringing an abrupt halt to online poker through “Black Friday” in April 2011.
Prediction market operators, including Kalshi and Polymarket, as well as sportsbooks exploring entry into the sector, remain engaged in various disputes regarding the classification and permissibility of their products.
Several states have already warned licensed sportsbooks that involvement in the prediction markets sector could jeopardise their regulatory standing, underscoring the uncertain landscape.
Pham’s remarks do not officially clear the path for prediction markets, but they are likely to elicit renewed optimism among operators seeking regulatory clarity.