The CFTC plans to file a “friend-of-the-court” brief supporting Crypto.com in the Ninth U.S. Circuit Court of Appeals on Tuesday.
- In an op-ed in The Wall Street Journal, Michael Selig stated that event contracts qualify as “swaps” under the Commodity Exchange Act and are subject to federal oversight.
- According to him, there are currently nearly 50 state cases arguing that event contracts constitute gambling and fall under state law.
- Selig said the agency will defend federally registered exchanges, including Polymarket, Kalshi, and Coinbase, against such state-level litigation.
Commodity Futures Trading Commission (CFTC) Chair Michael Selig said the agency will “no longer sit idly by” while state governments pursue litigation against federally registered exchanges, including Polymarket, Kalshi, and Coinbase (COIN).
The CFTC is starting out with a “friend-of-the-court” filing on Tuesday in support of Crypto.com in the Ninth U.S. Circuit Court of Appeals, according to an opinion piece written for The Wall Street Journal.
“The most common allegation is that these contracts are a form of gambling and therefore subject to state laws,” Selig wrote, noting that nearly 50 state-level cases are currently pending against CFTC-registered exchanges.
“The CFTC will no longer sit idly by while overzealous state governments undermine the agency’s exclusive jurisdiction over these markets by seeking to establish statewide prohibitions on these exciting products.”
Michael Selig, Chairman, Commodity Futures Trading Commission
The Legal Battle Over Prediction Markets
Selig maintained that event contracts serve legitimate economic purposes. According to him, they allow businesses and individuals to hedge risks tied to specific developments, help investors manage exposure, and generate market-based signals about future outcomes.
“Farmers can manage risk related to temperature changes that may affect crops, and small-business owners can hedge against tax increases or energy-price spikes, to name two examples,” he wrote.
He added that exchanges like Coinbase aren’t the “Wild West,” but self-regulatory organizations that are examined and supervised by experienced CFTC staff. Under the Commodity Exchange Act, Selig argued, event contracts qualify as “swaps.”
Selig noted that futures, swaps, and exchange-traded funds (ETFs) were once new products, but Congress granted the CFTC broad authority to oversee derivatives markets. Just because something is new doesn’t mean courts can reinterpret the law, he wrote.
Crypto Moves In Washington
Selig’s move comes amid stalled negotiations in Washington over the Digital Asset Market Clarity Act (CLARITY Act). The Senate Agriculture Committee, which oversees matters tied to the CFTC’s jurisdiction, advanced its portion of the bill in January. The Senate Banking Committee’s section, which falls under the Securities and Exchange Commission (SEC), remains stalled.
The intervention also follows the CFTC’s announcement of an expanded 35-member crew to run the Innovation Advisory Committee (IAC), which added Coinbase CEO Brian Armstrong to its roster alongside the leaders of Ripple, Robinhood, and Bullish.
COIN’s stock moved 1% higher after hours on Monday, building on Friday’s 16% rally sparked by its earnings call, though analysts remained cautious in their outlook. On Stocktwits, retail sentiment around the cryptocurrency exchange remained in ‘extremely bullish’ territory amid ‘extremely high’ levels of chatter over the past day.
Read also: Shark Tank’s Kevin O’Leary Says Crypto Crash Cleared Out ‘Poo Poo’ Coins – Only Bitcoin, Ethereum Matter Now
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