A group of 7 House Democrats has formally questioned why the U.S. top derivatives regulator has not cracked down on offshore prediction markets facilitating bets on war and government actions.
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7 House Democrats demand CFTC action on prediction market war bets
(P1) Seven House Democrats are pressuring the Commodity Futures Trading Commission for its failure to police offshore prediction markets, demanding in a Monday letter that the agency explain its inaction on event contracts related to war and potential insider trading. The group, led by Representatives Jim McGovern and Seth Moulton, gave CFTC Chair Michael Selig a deadline of April 15 to respond to their inquiries.
(P2) "Such corrupt trades deserve swift and decisive oversight," the lawmakers wrote in the letter, first obtained by CNBC. "Allowing these contracts to persist raises troubling concerns about the Commission's desire and capacity to fulfill a global regulatory role."
(P3) The letter highlights recent well-timed, suspicious trades on platforms like the offshore Polymarket concerning the U.S.-Israeli attack on Iran and the ouster of Venezuelan President Nicolas Maduro. The lawmakers also questioned potential conflicts of interest, noting Donald Trump Jr.'s role as an investor and advisor to Polymarket.
(P4) The inquiry intensifies a broader battle over who controls the fast-growing prediction market industry, which allows users to bet on events from elections to government shutdowns. The pressure from Congress comes as Chair Selig's CFTC is actively asserting federal jurisdiction over state gaming commissions, suing three states last week that had tried to block the platforms on gambling law grounds.
Regulatory Authority Questioned
The core of the Democrats' argument is that the CFTC already possesses the authority to act. They cite the Commodities Exchange Act, which allows the agency to regulate swap activities outside the U.S. that have a "direct and significant connection" with American commerce. The letter asserts these provisions empower the CFTC to apply its existing rules that prohibit bets related to terrorism, assassinations, and war.
The letter, also signed by Reps. Gabe Amo, Greg Casar, Jamie Raskin, Dana Titus, and Yassamin Ansari, asks directly whether the agency feels it has the authority to regulate insider trading on these markets and why no public action has been taken. This congressional scrutiny follows a series of proposed bills aimed at reining in the sector, including one from Moulton last month who also banned his own staff from using the platforms.
A Widening Regulatory War
The letter from the House members is the latest front in a multi-faceted regulatory conflict. While some lawmakers focus on potential corruption and insider trading, the CFTC has been focused on establishing its primacy.
Just last week, the agency sued Arizona, Illinois, and Connecticut to block state-level cease-and-desist orders against prediction markets. That legal strategy was bolstered Monday when a federal appeals court ruled that New Jersey gaming regulators cannot bar Kalshi, a U.S.-based and CFTC-regulated market, from its operations. Selig has publicly stated that state commissions are attempting to "nullify federal law," setting the stage for a continued clash between federal and state authorities.
This article is for informational purposes only and does not constitute investment advice.
