U.S. House Hearing Highlights CFTC Staffing Challenges Amid Prediction Market Growth

A U.S. House hearing has thrust the Commodity Futures Trading Commission’s staffing and jurisdiction into the spotlight as lawmakers and industry players spar over the future of prediction markets. At a July 21 hearing of the House Agriculture Subcommittee on Commodity Markets, Digital Assets, and Rural Development, Carl Kennedy — a partner at Katten Muchin Rosenman and a former CFTC attorney — warned that the CFTC may be too “short-staffed” to police fast-growing prediction platforms such as Kalshi and Polymarket while also assuming broader digital-asset responsibilities under pending legislation. Explosive growth, mounting complexity Kennedy’s written testimony stressed the scale of the challenge: trading volume across CFTC-registered prediction markets topped $25 billion in 2025, and one major platform saw average daily event-contract listings surge from roughly 1,600 in April 2025 to about 162,000 in April 2026. He argued that while the Commodity Exchange Act already provides a regulatory framework for event contracts on registered exchanges — covering market surveillance, financial integrity, customer protections and anti-manipulation controls — any expansion of the CFTC’s remit must be matched with added staff and funding. “With additional resources,” he said, the CFTC could take on new digital-asset markets while continuing to manage prediction-market growth. The jurisdictional fight: federal regulator vs. state gambling laws At the heart of the debate is whether sports-event contracts are federally regulated derivatives under the Commodity Exchange Act or gambling products that states can restrict. CFTC Chair Michael Selig has defended the agency’s “exclusive jurisdiction” over federally regulated prediction markets, while former CFTC Chair Gary Gensler has taken the opposite view in court filings, arguing that sports prediction contracts don’t meet the federal definition of swaps because they generally don’t hedge economic risk — “sports bets are very rarely, if ever, about hedging,” he wrote. Regulatory comments and the courtroom battleground The agency’s rulemaking process has drawn heavy interest: the CFTC received more than 1,500 public comments earlier this year. Kalshi and Polymarket have pushed for federal oversight, but several state gambling regulators want sports event contracts to remain governed by state gaming laws. Those state-federal tensions have spilled into courts. The CFTC blocked Kalshi from unwinding certain Michigan sports-event trades after a Michigan state court ordered the platform to stop offering those contracts, a move Kalshi described as putting it in an “impossible position” between conflicting federal and state orders. On July 20, a Washington state judge granted a preliminary injunction finding that Washington was likely to succeed in its claim that Kalshi’s sports contracts violate state gambling laws; that order is not set to take effect earlier than Aug. 5 while the court reviews further submissions. There is no single nationwide ruling yet: some states continue to press challenges while North Carolina has taken a different tack, recognizing federally registered prediction markets under a new tax framework starting in 2027. Where the CLARITY Act fits in The Digital Asset Market Clarity Act (CLARITY Act) primarily targets digital-asset market structure rather than rewriting prediction-market rules. It would divide oversight of digital assets between federal regulators and give the CFTC a larger role supervising digital commodity markets. Kennedy’s testimony emphasized what that added responsibility could mean for a regulator already managing rapid growth in prediction markets. Legislative outlook and politics The CLARITY Act cleared the Senate Banking Committee in May by a 15–9 vote, but it still faces negotiations and must secure the 60 votes needed to overcome a filibuster in the full Senate. The White House has accepted proposed ethics restrictions intended to address concerns about political officials’ crypto holdings, but the Senate had not published final bill text or scheduled a floor vote at the time of reporting. With a limited legislative calendar ahead of the August recess, senators still need to resolve outstanding issues and secure bipartisan support. Bottom line The fight over prediction markets is playing out on two tracks: the CFTC is defending its claim to federal authority in court and crafting event-contract rules, while Congress debates whether to broaden the agency’s digital-asset mandate under the CLARITY Act. Regulators and industry agree on one point raised by Kennedy — legal authority alone won’t be enough. Any expansion in jurisdiction will require commensurate increases in staff, funding and enforcement capacity if the CFTC is to manage new responsibilities without sacrificing oversight of existing markets.