Terry Duffy says the CFTC and SEC are making rules while circumventing Congress, so the next president can easily erase them with a simple pen stroke. He points to President Trump reversing Biden executive orders and argues that actually good regulation must withstand any administration.

The CFTC's regulatory authority over prediction markets stems from classifying them as "swaps"—agreements on an event with economic consequences. This financial instrument classification allows the agency to enforce rules against fraud and manipulation, sidestepping the state-level legal framework for gambling.

Whether prediction market contracts are securities or commodities is irrelevant for wrongdoers. The government can leverage tools from the CFTC, the Justice Department, and general criminal fraud statutes to prosecute the improper use of confidential information.

Contrary to expectations of a crackdown, the U.S. Commodity Futures Trading Commission (CFTC) has been remarkably friendly to prediction markets. It has gone as far as actively fighting on behalf of companies like Polymarket and Kalshi in court cases where state governments have attempted to shut them down, signaling a permissive federal stance.

Dr. Anas Al-Hajji alleges significant drops in oil prices are driven by market manipulation from the Trump administration. Officials have made incorrect statements about the war ending or the Navy escorting tankers, causing price plummets before the information is corrected, creating massive volatility.

The CFTC fails to regulate prediction markets because it is systematically weakened, operating with only one of five commissioners (an ex-crypto lawyer) and no enforcement division. Its expanded jurisdiction was sought by crypto interests desiring less oversight.

The CFTC can regulate prediction markets on diverse events because the legal definition of "commodity" is incredibly broad. The Commodity Exchange Act covers virtually everything in commerce except for a few specific carve-outs like onions and box office receipts, granting the agency expansive jurisdiction over non-traditional markets.

Prediction market platforms are promoting their products as 'CFTC-approved,' but this is misleading. They use a self-certification process where the CFTC has 24 hours to object. A lack of objection is not an endorsement, a critical distinction that CME's CEO argues is not being disclosed to retail users.

The CFTC's framework for prediction markets places the primary compliance burden on the exchanges themselves. They act as the first line of defense, responsible for evaluating each contract and certifying to the regulator that it is not "readily susceptible to insider trading, manipulation, fraud, and the like."