CFTC chair backs blockchain-based prediction markets as ‘truth machines’

Michael Selig said blockchain-powered prediction markets could improve price discovery and public information, even as several US states challenge the platforms in court.

US Commodity Futures Trading Commission (CFTC) Chair Michael Selig has voiced support for prediction markets paired with blockchain technology, claiming they could become powerful tools for discovering truth.

Speaking at the FIA Global Cleared Markets Conference in Boca Raton, Florida, on Monday, Selig argued that prediction markets, also known as event contracts, can provide valuable signals about future events when participants put money behind their views, describing well-functioning markets as “truth machines.”

“When participants express views on future events — and back those views with capital — they create accountability, transparency and information,” Selig said. He added that highly liquid prediction markets often produce signals that the public increasingly sees as more reliable than traditional opinion polls.

“The reality is that prediction market platforms are now viewed by the public as more accurate than political polls,” Selig claimed, pointing to the 2024 US presidential election as an example where market pricing captured the scale of the outcome.

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Selig’s backing of prediction markets comes as several US states have taken legal or regulatory action against these platforms, arguing that their event-based contracts resemble unlicensed gambling.

Last week, two US federal court rulings allowed Nevada regulators to continue pursuing legal action against prediction market platforms Polymarket and Kalshi. In February, the state sued Kalshi after the prediction market company lost its court challenge to stop the state’s regulator from taking action over its sports prediction markets.

Massachusetts has also taken action, filing a lawsuit against Kalshi over sports prediction contracts offered to residents. Meanwhile, Connecticut regulators issued cease-and-desist letters to Kalshi and Robinhood, ordering them to stop offering certain event contracts tied to sports outcomes.

The CFTC chair said the agency plans to provide clearer rules for how event contracts can be listed and traded under the regulator’s framework. He said staff have been directed to draft guidance outlining how these markets should operate while remaining compliant with existing derivatives laws.

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Selig also said the CFTC plans to pursue a clearer classification framework for crypto assets and provide guidance on how rules apply to developers of non-custodial software such as digital wallets and decentralized finance applications.

He maintained that the agency should focus on clear rulemaking instead of ambiguity and enforcement-first policy, claiming that “America is now the crypto capital of the world.”

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Source: CoinTelegraph