The US Securities and Exchange Commission (SEC) is keeping a close eye on prediction markets, coordinating directly with the Commodity Futures Trading Commission (CFTC) as both agencies try to sort out where regulatory lines begin and end.
That scrutiny came up last week during a Senate Banking Committee hearing, when SEC Chairman Paul Atkins told lawmakers the agency is in regular talks with the CFTC about how prediction markets should be overseen.
He described the space as “an important area of focus,” pointing to the real possibility that responsibilities between the two commissions could overlap.
During the hearing, Sen. Dave McCormick raised prediction markets as a growing segment that can offer price discovery and tools to manage risk.
Sen. McCormick noted that the CFTC is the primary regulator for the products, but asked how the SEC is coordinating with the CFTC to provide greater clarity for US market participants.
SEC Chairman Atkins said prediction markets are one area where overlapping jurisdiction can arise, even if the products are currently “mostly” on the CFTC side.
He said the agencies need to be aligned in how they address the market, and he tied that effort to a closer working relationship between the two chairs.
Atkins pointed to CFTC Chair Michael Selig, saying the two agencies will be “more harmonised” than before.
He explained that he and Selig are in continuous communication, and that the SEC and CFTC are meeting once a week, including staff-level engagement, to coordinate on issues that overlap between the agencies.
No comment on new prediction market regulations
When asked whether rulemaking is imminent, Atkins did not commit to a specific action.
He said the outlook would depend on what Congress produces in legislation, while also arguing the SEC already has enough authority to apply existing standards in the appropriate circumstances.
He reiterated the SEC’s view that a security remains a security regardless of how it is recorded or traded.
Atkins added that the nuance in prediction markets can turn on contract wording and “what exactly is being done,” suggesting that product design can affect how regulators view the activity.
He said that variability underscores why the SEC and CFTC need to be closely connected, given the potential for gaps where market participants might otherwise face uncertainty.
The exchange on prediction markets came amid broader discussion of crypto market structure and coordination between regulators.
Atkins told lawmakers earlier in the hearing that he and the CFTC chair intend to provide a bridge toward legislation through a joint crypto initiative.
He characterised the harmonisation as a way to reduce inefficiency created by separate oversight of futures and cash markets.