CFTC staffing gap exposed as Congress weighs CLARITY Act powers over prediction markets
A House hearing heard the CFTC is under-resourced to police Kalshi and Polymarket as federal-state courtroom clashes multiply and the CLARITY Act nears a vote.
A congressional hearing has laid bare concerns that America’s derivatives regulator lacks the staff and legal clarity to police a prediction market industry that has exploded in size over the past year, just as Congress edges closer to a vote on legislation that could hand the agency sweeping new powers over digital assets.
Lawmakers on the House Agriculture Subcommittee on Commodity Markets, Digital Assets, and Rural Development held a hearing titled “Examining Customer Protections and Market Integrity in Sports Event Prediction Markets” on 21 July. The session put the Commodity Futures Trading Commission’s (CFTC) resources and remit at the centre of a debate that increasingly pits federal regulators against state gambling authorities over platforms such as Kalshi and Polymarket.
A regulator stretched by explosive growth
Carl Kennedy, a partner at law firm Katten Muchin Rosenman and a former CFTC lawyer, told the subcommittee the agency was likely too “short-staffed” to properly regulate and enforce standards across prediction market platforms. He argued that the Digital Asset Market Clarity Act, better known as the CLARITY Act and currently under consideration in the Senate, could give the CFTC the additional authority it needs to handle both digital assets and the rapid rise of event contract trading.
“I do believe that with additional resources — they’re about to perhaps receive additional authorities under the CLARITY Act — with additional resources to address these new asset classes in the cash markets and crypto, as well as to deal with the explosive growth of prediction markets, I think that the CFTC certainly should receive additional resources,” Kennedy told lawmakers, according to Cointelegraph.
The scale of that growth was underlined by figures cited during the hearing and reported by crypto.news: trading volume across CFTC-registered prediction markets exceeded $25 billion in 2025, while average daily event-contract listings on one major platform rose from roughly 1,600 in April 2025 to approximately 162,000 by April 2026. Kennedy’s written testimony argued that the existing Commodity Exchange Act already gives the CFTC a framework to regulate event contracts on registered exchanges, including surveillance, financial integrity and manipulation controls that he said could extend to sports contracts.
Federal and state authorities collide in the courts
The staffing question sits alongside a sharper jurisdictional fight. CFTC Chair Michael Selig, confirmed by the Senate in December and currently the only Senate-confirmed member of a leadership panel normally comprising five commissioners, has asserted what he calls the agency’s “exclusive jurisdiction” over federally regulated prediction markets, classifying event contracts as swaps under the CFTC’s purview.
That stance has produced direct conflict with state regulators. The CFTC recently instructed Kalshi to disregard a Michigan court order requiring it to halt certain sports event contracts, a move the company said left it in an “impossible position” between competing federal and state requirements. A Washington state judge added to the pressure on 20 July, granting a preliminary injunction in a separate dispute. Some legal observers cited in the reporting believe one or more of these cases could ultimately reach the US Supreme Court.
The CFTC has also been gathering public input on the issue, receiving more than 1,500 comments on its prediction market rulemaking earlier this year. Kalshi and Polymarket have backed continued federal oversight, while several state gambling regulators have argued that sports event contracts belong under state gaming law rather than commodities regulation. Democratic senators have described Selig’s approach as an “assault” on state authority.
CLARITY Act text expected before August recess
Republican senators pushing for a vote before Congress breaks for its August state work period say the text of the CLARITY Act is expected to be released soon, though details on how it would treat prediction markets, ethics provisions and jurisdictional boundaries had not been made public as of the hearing. Gambling industry groups petitioned the Senate in June to add language explicitly barring event contracts tied to sports and casino-style gaming from the bill.
The White House has separately confirmed that the Trump administration agreed to what it called the “most comprehensive and wide-ranging ethics provision in history” as part of negotiations on the bill, saying it had “bent over backward” to accommodate Democratic concerns.
For European and UK institutions weighing exposure to US-listed event contracts, the episode underscores how unsettled the regulatory perimeter remains: a single agency chair is asserting exclusive federal control even as courts, state regulators and Congress each pull in different directions, with legislative clarity still weeks away at best.
Read more: Westminster inquiry probes UK banks’ reluctance to serve crypto firms
