Trump Steps In to Back CFTC-Regulated Prediction Markets: Proper Regulation Is Crucial, Many States Are Misusing Regulations to Impose Sanctions

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US President Trump publicly supported the CFTC's exclusive jurisdiction over prediction markets, calling it "vitally important," while sharply criticizing several state-level officials attempting to crack down on prediction platforms using local gambling laws. (Background: The Trump administration backs Polymarket and Kalshi! The US Department of Justice and CFTC sue Arizona and two other states, igniting a prediction market jurisdiction war) (Context: CFTC Chairman: Arizona's criminal prosecution of Kalshi is "completely inappropriate" — this is not a crime but a jurisdictional dispute) US President Trump posted on Truth Social on Tuesday, publicly supporting the US Commodity Futures Trading Commission (CFTC)'s "exclusive jurisdiction" over prediction markets, while sharply criticizing several state-level officials attempting to crack down on prediction platforms using local gambling laws. Trump wrote in the post: "The CFTC's exclusive jurisdiction over prediction markets must be maintained — this is vitally important to industry development." Multiple state attorneys general and regulators have argued that prediction market platforms (Kalshi, Polymarket, Crypto.com, Robinhood) are providing unauthorized gambling services, and have filed lawsuits or issued cease-and-desist orders. CFTC Chairman Mike Selig insists that prediction markets fall under federally regulated Designated Contract Markets (DCMs), and that state-level intervention constitutes a federal preemption dispute. The CFTC has filed lawsuits against Minnesota, Illinois, New York, and Arizona, seeking to halt state-level regulatory actions. This is already the third major judicial battle on the path to legalizing prediction markets. During the 2024 US presidential election, trading volumes on Polymarket and Kalshi surged, attracting massive retail and institutional participation, after which state-level regulators began moving in under the banner of "unlicensed gambling." Trump's shift in stance has raised questions about conflicts of interest. He told reporters last month that he was "not too pleased" with prediction markets, following controversy over "timely bets" related to the conflict with Iran appearing on the platforms. But his attitude noticeably softened after his son Donald Trump Jr. became an advisory board member for Polymarket and an advisor to Kalshi, while also holding equity stakes in both platforms. Donald Trump Jr. holding titles at two competing prediction platforms simultaneously adds further complexity to Trump's declaration of "neutrally supporting the CFTC." If the CFTC indeed secures exclusive jurisdiction, the valuations of Polymarket and Kalshi will surge significantly due to regulatory clarity. The CFTC established a dedicated advisory group in March, tasked with overseeing the listing and trading of event contracts, ensuring market participants comply with anti-manipulation, surveillance, and market integrity requirements. The CFTC argues that prediction markets fall under the existing derivatives framework of the Commodity Exchange Act, meaning they should be regulated at the federal rather than state level. But multiple state attorneys general clearly aren't buying it. Former New Jersey Governor Chris Christie, New York Attorney General Letitia James, Minnesota Governor Tim Walz, and Illinois Governor JB Pritzker were all directly named and criticized in Trump's post. Trump described them as "scum who set the rules." Trump emphasized in the post: "Other countries are also pursuing this new type of financial market — we want to maintain our leading position." This points to prediction markets having become a track in global financial innovation competition. The UK's London Metal Exchange (LME) has established an independent prediction market division, and the EU is also pushing for the classification of prediction contracts under digital asset regulatory legislation. For Taiwan's crypto market, the US federal-state jurisdictional dispute provides an important reference. If Taiwan's prediction market platforms seek a compliance path in the future, they can invoke the US CFTC's "federal preemption" principle to argue to the FSC that regulation should be unified under a single federal-level agency, avoiding the multi-headed chaos of local-level (such as county/city or departmental-level) oversight. Taiwan's current regulation of crypto gambling and derivatives indeed has multiple voices from the FSC, the Securities and Futures Bureau, and even county/city governments, extremely similar to the US federal-state dispute. If the CFTC ultimately prevails, Taiwan's regulators will face greater pressure to accelerate the establishment of a clear crypto derivatives framework.

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