The Signal

Washington just put prediction markets on notice from both sides of the split federal perimeter. In a Senate hearing, SEC Chair Paul Atkins signaled that some prediction market contracts could fall under SEC jurisdiction “depending on how they are structured and worded” (Decrypt; The Block). A day earlier, new CFTC Chair Michael Selig laid out a more formalist view: prediction markets should run through CFTC-regulated exchanges with approved rulebooks, using self-certification and clearing as the gating mechanism (Odd Lots).

Net: the industry’s regulatory “center of gravity” is shifting from category debates (politics yes/no) to structure tests (is this a swap/future/event contract vs. a security vs. something else). For platforms, that’s a direct hit to listing strategy, entity structuring (onshore/offshore), and how they market contracts to users and institutions.

The Mechanism

• Contract design becomes the regulatory battlefield. Atkins’ “structured and worded” comment telegraphs an SEC hook: if contracts start to look like investment products (pooling, passive exposure, issuer-like features, “economic reality” marketing), the SEC can argue securities characterization—even if the platform calls it “event trading.”
• CFTC doubles down on the exchange perimeter. Selig’s framing emphasizes the CFTC model: DCMs/SEFs + rulebooks + self-certification + clearing. That implicitly pressures consumer platforms to either (a) fit inside the CFTC’s exchange regime cleanly or (b) keep U.S. users fully walled off from offshore liquidity.
• Dual-regulator risk forces “lowest-common-denominator” listings. If platforms fear SEC overlap, they’ll bias toward contracts that look like classic CEA event contracts and away from anything with a whiff of tokenization, revenue-share, index-like baskets, or ongoing exposures.
• Data distribution deals now carry compliance gravity. After ICE’s institutional productization of Polymarket’s tape (last edition), the SEC’s posture raises a new question: when “prediction prices” are packaged for institutions, regulators may scrutinize whether the underlying market is being effectively promoted into regulated capital markets workflows—even if institutions aren’t trading on the venue.
• Resolution disputes become enforcement accelerants. Mainstream-facing disputes (e.g., high-profile entertainment/sports adjudications) aren’t just UX issues; they’re the sort of integrity flashpoints that invite regulators to ask whether a platform’s rulebook and governance resemble a real SRO-grade process.
• Competitive advantage shifts to whoever can prove “clean perimeter + clean contracts.” Kalshi’s regulated posture and rulebook discipline gain value; offshore-heavy venues gain incentive to harden U.S. separation, governance, and evidence standards—especially as institutional attention rises.

The Landscape

Market Position. The industry is scaling into “can’t-ignore” territory: Kalshi just used Super Bowl flow to argue that CFTC-regulated event contracts can hit sportsbook-scale notional, while Polymarket is simultaneously pushing upstream into institutional signal distribution via ICE. Those two trajectories—regulated onshore liquidity and institutionalized data products—increase the payoff for regulators to define who’s allowed to do what, and under which statute. The next competitive phase looks less like “who has the best odds feed” and more like “who can list the most contracts with the least legal ambiguity while keeping liquidity deep.”

Regulatory Environment. The CFTC message (Selig) is: prediction markets belong inside the derivatives architecture, with exchanges doing frontline governance through approved rules and surveillance. The SEC message (Atkins) is: some structures may cross into securities, and the agency is watching. Together, that sets up a jurisdictional squeeze: platforms may face parallel theories of oversight depending on whether a contract resembles an event future, a security-based swap, an investment contract, or a brokered product—especially if distribution and marketing target investors rather than “hedgers.”

Key Data

• SEC posture: Atkins says some prediction markets could fall under SEC jurisdiction depending on structure/wording (Decrypt; The Block).
• CFTC posture: Selig reiterates the exchange rulebook + self-certification + clearinghouse model as the core regulatory mechanism (Odd Lots).
• Institutional distribution (from last edition): ICE launched Polymarket Signals and Sentiment with exclusive institutional capital markets distribution (prior coverage).
• Retail-scale regulated volume (from earlier this week): Kalshi reported $1B+ Super Bowl trading volume (prior coverage).

What’s Next

Watch for platforms to respond not with blog posts but with contract taxonomy and entity architecture changes: tighter listing standards, more explicit rulebook language, and clearer separation between CFTC-regulated U.S. venues and offshore/crypto rails. The next catalyst will be any concrete step that turns these “signals” into perimeter-setting—e.g., SEC staff guidance, a CFTC interpretive statement on event contract classes, or an enforcement action that uses contract structure (not just “politics/sports”) as the deciding factor.

Predict This covers the evolution of prediction markets — platforms, regulation, volume, and methodology. For questions or tips: reply to this email.

🌐 Visit whatsthelatest.ai for the latest coverage and more.

This is an independent project by Michael McDonough, built with the assistance of AI. Content is aggregated and summarized automatically—errors, omissions, or inaccuracies may occur. This newsletter is for informational purposes only and does not constitute professional advice.