SEC and CFTC Join Forces to Regulate Prediction Markets
Jesse M. Cox Published 25/06/2026
Two of the most powerful U.S. government regulators in the finance industry are joining forces to regulate prediction market sites. The U.S. Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC) will be working together in this mission going forward. The move will add a second federal overseer to the oversight landscape, shaping the regulatory framework for event-contract platforms.
This development means platforms seeking sole oversight from the derivatives regulator must now contend with dual federal agency involvement. However, it also means that state regulators challenging federal regulators must now deal with two powerful entities on the federal side of the issue.
The SEC and the CFTC will prove to be formidable foes
According to a release from the SEC, the objective of the union with the CFTC on prediction market regulatory matters is in order to further update, clarify, and harmonize certain derivatives product definitions and interpretive issues.
“Clarification is long overdue on Title VII definitional issues, including event-based products," SEC Chairman Paul S. Atkins said in the statement. "Through good-faith cooperation efforts, we can create a level playing field where established firms and new entrants alike can compete and innovate on equal footing regardless of whether they’re registered with the SEC or CFTC.”
On the surface, having dueling regulators overseeing their product might not seem like a good thing for prediction market sites. However, some industry insiders believe that getting the SEC involved with the CFTC will provide a clear path. It will provide direction for these sites to follow as they create and market their event contracts.
Jeremy Liaboi is a partner at Ropes & Gray LLP. His firm practices futures and derivatives law. He described this move to Bloomberg Law as a "welcome first step" toward creating a unified front in this area of regulation.
SEC Can Help CFTC With Insider Trading Enforcement
Insider trading is a hot-button issue with event contracts. Charu Chandrasekhar is a lawyer with the firm Debevoise & Plimpton LLP. He's a former SEC enforcement attorney. He thinks the SEC can beef up security when it comes to identifying and punishing insider trading.
“The CFTC has been moving very aggressively to police fraud in connection with prediction markets," Chandrasekhar said. "To the extent that the SEC is interested in exercising jurisdiction over this narrow slice of prediction markets activity, its enforcement interest would be comparable in tone and assertiveness.”
Lawyer Liz Davis of Davis Wright Tremaine LLP feels that the two regulators might struggle to find common ground. She's a former chief trial attorney in the CFTC’s enforcement division.
"The two agencies tend to have different approaches when investigating and prosecuting their cases, given that the SEC is a rules-based regime and the CFTC is a principles-based regime," Davis said. “The CFTC does have far fewer enforcement staff as compared to the SEC, but I’ve always said that the CFTC is smaller but nimbler than the SEC.”
The SEC is seeking public comment on this matter
The SEC and CFTC are looking to close loopholes and set a unified path. They are seeking public comment on their decision to work together to regulate prediction markets. Areas in which they desire input include definitions relating to swaps and security-based swaps. That includes the scope of certain exclusions from the swap definition. The treatment of novel or emerging products and jurisdictional and interpretive questions are other issues.
“[This] joint request for public comment presents an opportunity to address longstanding ambiguities within Title VII of Dodd-Frank that have stifled fair competition and responsible innovation,” CFTC Chairman Michael S. Selig said in a statement.