Senator Demands CFTC Records on Crypto and Prediction-Market Oversight
Commentary by Steven Lofchie
Senator Elizabeth Warren demanded that the CFTC turn over records on its oversight of cryptocurrency and prediction markets. The Senator alleged that the agency has been captured by the industries it regulates.
In a letter to CFTC Chair Michael Selig, Ms. Warren cited a sharp drop in enforcement and a recent move to withdraw a penalty against a Trump-linked crypto exchange. She alleged the CFTC was ill-equipped to oversee prediction markets, which she likened to gambling traditionally regulated by states and tribes. She noted that the CFTC cut its workforce by about 25 percent even as Congress is considering expanding the CFTC's jurisdiction.
Ms. Warren also highlighted that the CFTC gave favorable treatment to Polymarket, Gemini, and other firms tied to President Trump's family. Ms. Warren asked for records on staff separations since January 2025, the administrative records behind no-action letters issued to Polymarket and Gemini, and communications between prediction-market firms and the CFTC regarding proposed legislation.
Commentary
Questions about the proper regulatory oversight of event contracts would be best settled by legislative determination, rather than by regulatory assertion that may be accepted or rejected by the courts based on a fairly thin paper trail. As a practical matter, the challenges in regulated contracts that are based on events at, for example, awards shows are simply different than those in regulating contracts based on "traditional" commodities such as energy and interest rates. This requires considerations of what a suitability determination might consider, how individuals who become addicted to investment in such contracts might be handled, and what does it mean to "insider trade" on such contracts.
In many ways, the treatment of event contracts not tied to economic events under the Trump Administration will parallel the treatment of digital assets under the Biden Administration; even though the first is permissive and the second is prohibitory. What unites the two treatments is ambiguity and uncertainty that should be resolved by legislative action that clearly assigns regulatory authority. Whether that assignment is to the States or the CFTC, or perhaps to both, is in many ways less significant than is the certainty of the assignment.
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