President Donald Trump declared on Truth Social on May 26, 2026, that it is “critically important” for the Commodity Futures Trading Commission to retain “exclusive authority” over prediction markets, warning that “Other Countries are after this new form of Financial Market” as the U.S. crypto industry faces a deepening federal-versus-state jurisdictional war.
Trump’s post framed federal prediction market oversight as part of setting “rules of the road” that represent the “Gold Standard for the States.” He singled out Democratic officials by name, targeting Chris Christie, Letitia James, Tim Walz, and JB Pritzker as leaders of state-level resistance to federal authority over the sector.
The presidential statement came the same day CFTC Chair Michael Selig filed an amicus brief in the U.S. Court of Appeals for the Ninth Circuit, asserting exclusive CFTC jurisdiction over prediction markets. Selig called event contracts “derivatives, plain and simple,” regulated by the agency for over two decades under the Commodity Exchange Act.
The platforms at the center of the fight are Polymarket and Kalshi, both of which operate federally registered prediction markets. Selig’s “Future-Proof” initiative, which applies a “minimum effective dose of regulation” philosophy, positions the CFTC as the preferred home for the entire $3 trillion+ digital asset market, explicitly rejecting the Biden-era enforcement-first approach.
A Federal Circuit Split That Could Reach the Supreme Court
Trump’s intervention did not arrive in a vacuum. Two federal appeals courts have issued directly contradictory rulings on who governs prediction markets, creating a circuit split that legal experts believe is headed to the Supreme Court.
The Third Circuit Court of Appeals ruled 2-1 on April 6, 2026, that Kalshi’s sports-related event contracts are swaps under federal law and that the CFTC holds exclusive jurisdiction. It was the first federal appeals court ruling on prediction market regulation.
Just weeks later, on May 22, the Ninth Circuit denied stays for both Kalshi and Polymarket, allowing Nevada and Washington state-level gambling enforcement to proceed. The ruling directly contradicts the Third Circuit’s position, letting state regulators treat prediction markets as gambling rather than derivatives.
Prediction market traders themselves have priced in a 64% probability that the Supreme Court accepts a sports event contract case by year-end 2026, reflecting how seriously the legal community views this divide.
Market-Implied Probability
64%
Chance the Supreme Court takes a prediction market case by end of 2026
Based on live prediction market pricing amid the Third–Ninth Circuit split. Source: Foreign Policy Journal
The CFTC has escalated its own offensive, filing lawsuits against six states with Democratic attorneys general: Wisconsin, New York, Connecticut, Illinois, Arizona, and Minnesota. In total, 13 states currently maintain an active enforcement posture against prediction markets.
Arizona filed a 20-count criminal information against Kalshi on March 17, 2026. Minnesota’s legislature passed a prediction market ban bill with overwhelming margins, 100-32 in the House and 57-9 in the Senate, now pending Governor Walz’s signature.
The conflict extends beyond U.S. borders. Indonesia, Spain, and India all blocked prediction markets within the same week as Trump’s post, according to a single CoinDesk report. The simultaneous international crackdown stands in stark contrast to the U.S. federal government’s deregulatory push, even as regulators in countries like the Philippines are exploring sandbox frameworks to bring crypto platforms under structured oversight.
Congressional Democrats have pushed back sharply. Sen. Chris Murphy called Trump’s jurisdictional claim fabricated:
“This is patently false. Congress has not given the exclusive power to the CFTC to regulate prediction markets. He just made this up out of thin air because the gambling companies that back Trump wanted him to.”
— Sen. Chris Murphy, via Common Dreams
Sen. Elizabeth Warren accused the CFTC of “trying to strip states of their authority to regulate gambling within their borders,” adding that the agency should “focus on ensuring our derivatives markets don’t blow up the economy again, not helping corrupt political insiders cash in.”
Financial Ties and Broader Crypto Industry Stakes
Trump’s defense of prediction markets comes amid documented financial ties between his family and the industry he is championing. Donald Trump Jr. serves as a paid adviser to both Polymarket and Kalshi, the two largest U.S. prediction market platforms.
Trump Media partnered with Crypto.com to launch “Truth Predict,” a dedicated prediction market platform. Crypto.com’s parent company donated $30 million to Trump’s super PAC in 2025. A Congressional investigation into these conflicts of interest was confirmed on May 22, 2026.
Congress has introduced more than 10 bills in 2026 to restrict prediction market platforms, including the BETS OFF Act from Murphy and Rep. Casar, and the End Prediction Market Corruption Act from Sens. Merkley and Klobuchar.
For crypto market participants, the jurisdictional battle carries implications far beyond betting platforms. If the CFTC wins exclusive authority over prediction markets by classifying event contracts as derivatives under the Commodity Exchange Act, it strengthens the agency’s broader claim as the primary regulator for digital assets, potentially displacing the SEC’s oversight role across emerging crypto markets.
That regulatory realignment is what the crypto industry has long sought. The CFTC’s lighter-touch, principles-based approach under Selig’s “Future-Proof” framework contrasts sharply with the SEC’s enforcement-heavy posture. A CFTC win here would set a precedent that could reshape how Bitcoin ETFs and decentralized finance products are governed, a shift that comes as digital asset funds recently experienced their largest weekly outflow of 2026.
The crypto Fear & Greed Index sits at 34, reflecting a “Fear” reading despite the bullish regulatory signals from the White House. With the Third and Ninth Circuits in open disagreement, a Supreme Court case on prediction market jurisdiction appears increasingly likely before year-end, and its outcome may define the regulatory architecture for the broader crypto sector for years to come.
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Cryptocurrency and digital asset markets carry significant risk. Always do your own research before making decisions.
