Regulatory Agencies Take Coordinated Action
Two major U.S. financial regulators have moved forward with plans that could reshape how cryptocurrency and prediction markets operate. The Securities and Exchange Commission and the Commodity Futures Trading Commission both submitted formal regulatory proposals to the White House recently.
This coordinated step represents what might be the most concrete regulatory progress for these industries since the current administration took office. The submissions went to the Office of Information and Regulatory Affairs, which reviews major regulatory actions before they proceed further.
Getting a plan to OIRA doesn’t mean rules are finalized, of course. But it does confirm both agencies are treating these matters seriously enough to put formal proposals on paper and send them up through official channels.
A Shift in Regulatory Philosophy
The current approach seems quite different from what came before. The previous administration pursued both industries primarily through enforcement actions—filing lawsuits, imposing fines, and using regulatory ambiguity as a tool rather than addressing it directly.
The current administration started with the opposite posture. The CFTC underscored this shift early by withdrawing a pending proposal that would have banned contracts tied to political and sports events entirely.
Two Different Regulatory Paths
The SEC’s submission focuses on what agency chair Paul Atkins describes as a token classification framework. This addresses a core problem the industry has complained about for years: there’s no clear legal standard determining whether a digital asset counts as a security under SEC jurisdiction or a commodity under CFTC jurisdiction.
Companies operating in this space have faced enforcement actions built on that ambiguity. Investors have operated without knowing which rules applied to the assets they held. A formal taxonomy would replace this uncertainty with written criteria, giving both companies and investors a clearer compliance path.
Atkins framed the goal simply—people entering the market deserve to know their regulatory obligations before they act, not after they receive a subpoena.
Prediction Markets Get Attention
The CFTC’s submission addresses prediction markets, platforms where users buy and sell contracts tied to real-world outcomes ranging from election results to sports scores. Chair Michael Selig indicated the agency plans to launch a formal rulemaking process, describing the intent as setting clear standards for which event contracts can list and trade legally.
The practical effect would place platforms like Kalshi and Polymarket inside a federal regulatory structure. This would distinguish their operations from state-level gambling activity—a distinction several states currently refuse to accept.
This distinction matters enormously for the platforms involved. Billions of dollars in trading volume currently flow through prediction markets whose legal status varies depending on which state’s attorney general happens to be paying attention at any given moment.
Federal oversight would create a single compliance standard, but it would also impose market surveillance requirements, client protection rules, and ongoing reporting obligations that conventional gambling sites don’t carry.
Legal and Jurisdictional Challenges
The Supreme Court’s 2024 Loper Bright ruling curtailed the authority of federal agencies to interpret ambiguous statutes on their own. This means rules built on agency guidance rather than explicit congressional authorization face real legal exposure.
Atkins acknowledged this limitation directly, stating that the industry ultimately needs statutory certainty that only Congress can provide. Regulatory guidance fills a gap, but courts can overturn it and future administrations can reverse it without going through the full legislative process.
The conflict between federal and state authority adds another layer of friction, particularly for prediction markets. New York and several other states classify sports event contracts as gambling, subject to state law, and have already issued cease-and-desist orders against platforms the CFTC would prefer to regulate federally.
Both jurisdictions claim authority over the same transactions, and no agreement between them currently resolves the overlap.
Federal prosecutors added a third constraint independent of jurisdiction. Officials made clear that prediction markets don’t receive immunity from criminal fraud statutes. Anyone who attempts to manipulate an underlying event to profit from a related contract—fixing an election, influencing a game outcome—faces prosecution regardless of what the CFTC’s new rules say about the contracts themselves.
It’s a complex situation, really. The regulatory moves represent progress, but they’re happening within a legal landscape that’s still evolving. The agencies are trying to create clarity where there’s been confusion, but they’re working within constraints that limit how much clarity they can actually provide.
