Members of Congress questioned whether sports predictions contracts should fall under federal commodities law during a House Committee on Agriculture hearing tied to the reauthorization of the Commodity Futures Trading Commission.
The Dec. 11 hearing, titled “CFTC Reauthorization: Stakeholder Perspectives,” focused on oversight and funding of the derivatives regulator, whose formal authorization expired in 2013. But lawmakers repeatedly raised concerns that prediction markets offering sports contracts are operating outside the regulatory framework traditionally used for sports betting.
The scrutiny comes as prediction markets have rapidly expanded into sports, triggering legal challenges and enforcement actions from state regulators who argue the contracts function as unlicensed sports betting. Meanwhile Kalshi and other CFTC-registered exchanges, maintain their products are financial instruments subject to commodities law and federal oversight, not state gambling rules.
Several lawmakers questioned whether the CFTC has the authority, expertise, or resources to oversee products that increasingly resemble nationwide sports wagering.
Lawmakers question role of CFTC
Rep. Doug LaMalfa of California challenged the classification of sports event contracts as financial instruments regulated by the CFTC.
“Sports betting is somehow being defined as in the bailiwick of the CFTC,” LaMalfa said. “They’re being called trades when it’s flat-out gambling.”
LaMalfa asked former CFTC General Counsel Rob Schwartz if the agency is equipped to regulate gambling federally. Schwartz said the CFTC is already resource-constrained and warned against expanding its mandate without additional staffing or funding. He was one of five experts brought in to answer questions.
“I don’t think the CFTC has adequate resources now,” Schwartz said. “Expanding its remit without expanding its capacity is not helpful.”
Public interest standard under scrutiny
Former CFTC Commissioner Dawn Stump addressed how sports contracts came under the commission’s authority. She pointed to language in the Commodity Exchange Act that allows the CFTC to block certain event contracts if deemed contrary to public interest, including those involving gaming.
Stump said Congress may not have fully considered the implications of that statutory language.
“I don’t think there was sufficient consideration of the public interest determination within the statute,” Stump said.
Prediction market operators have argued that the law gives the CFTC discretion rather than a prohibition. That is an interpretation that has been central to ongoing legal disputes with state regulators.
Tribal gaming, state oversight concerns
Rep. Gabe Vasquez of New Mexico said prediction market operators are effectively bypassing state sports betting rules and tribal gaming compacts.
“When it comes to sports betting, the rules are simple,” Vasquez said. “In New Mexico, it only happens at tribal casinos under tribal, federal, and state supervision with strong safeguards in place.”
Vasquez urged the committee to consider modifying federal law as part of the reauthorization process to limit or prevent sports event contracts under the CFTC.
“If online sports betting shifts into the CFTC’s purview, the traditional system gets bypassed,” Vasquez said. “That has real consequences for tribal revenue and tribal authority.”
Self-certification process draws criticism
Several lawmakers also raised concerns about the CFTC’s self-certification process, which allows exchanges to list new contracts unless the regulator objects.
Rep. Salud Carbajal of California said his office has heard growing concerns about unregulated betting tied to prediction markets. He questioned whether the CFTC should be overseeing sports-related products at all.
“I don’t think the CFTC has the authority or the expertise to regulate gambling,” said Ben Schiffrin, director of securities policy at Better Markets.
Reauthorization remains open-ended
House Committee on Agriculture Chairman Glenn Thompson framed the hearing as part of a broader effort to reauthorize and modernize the CFTC, whose funding authorization lapsed more than a decade ago.
Any changes to sports event contracts would require amendments to the Commodity Exchange Act and approval by both the House and Senate. While several lawmakers signaled support for revisiting the issue, the hearing stopped short of any specific legislative proposal.
