THE Commodity Futures Trading Commission (CFTC), regulatory body for derivatives markets in the United States, is facing a critical emptying of its oversight area precisely at the time when prediction markets and the event contracts are undergoing strong expansion.
According to a report from Barron’sthe CFTC’s enforcement office in Chicago — historically the agency’s main litigation center — went from about 20 Trial Lawyers for Virtually Zero after the last lawyer left this week. Insiders describe the office as having “become a ghost town.”
Inspection shrinks while the market grows
The loss of personnel comes at an extremely sensitive time. Platforms like Kalshi, Polymarket, Robinhood and Crypto.com have been recording accelerated growth in contracts linked to:
- Elections
- Sports results
- Economic indicators
- Real world events
These contracts are framed as derivatives and commodity contractswhich places the CFTC as the main federal regulator of this market.
Despite this, inspection capacity fell drastically.
Significant drop in CFTC shares
The numbers show the direct impact of staff shortages:
- Fiscal Year 2024:
- 58 inspection actions
- $17.1 billion in penalties and settlements
- Fiscal Year 2025:
- Only 13 shares
- Less than $10 million in penalties
The Chicago office has always been responsible for complex market manipulation, derivatives fraud and cryptoassetsincluding investigations linked to Binance and to FTX.
Now, according to sources close to the case, there are no longer any active supervisory attorneys in the office.
“No police on the street”, say former employees
The situation generated strong concern among former members of the agency.
David Slovick, a former CFTC lawyer in Chicago, stated:
“Chicago is the birthplace of futures markets. Cutting oversight there sends a very bad signal to the market about whether the government is really watching or whether the rules still matter.”
Another former employee was even more direct:
“If I were a different person, I would launch a crypto scam right now because there are no cops on patrol.”
Why this matters for betting and iGaming
For the sector of betting, iGaming and prediction marketsthe problem goes beyond a simple internal CFTC crisis.
You prediction markets function as event-based financial contracts. This means that:
- They are directly under the CFTC jurisdiction
- They depend on supervision against use of privileged information, market manipulation and cheats
At the same time, the agency’s workload could grow even more.
Last year, the US House of Representatives approved a project that transfers much of the supervision of the crypto market from SEC for the CFTC. The proposal still awaits a vote in the Senate.
Former lawyers for the agency told Barron’s that if this happens, the CFTC will be dramatically undersized to fulfill its function.
Change of stance: less repression, more development
The weakening of supervision coincides with a change of political tone within the CFTC itself.
Since assuming the presidency of the agency in December, Mike Selig has publicly defended:
- The expansion of prediction markets
- Modernizing the rules
- Less focus on aggressive litigation and more regulatory clarity
This approach represents a break with the traditional model of “regulating through punishment”.
The problem, according to experts, is the contrast:
👉 fewer prosecutors to supervise
👉 further stimulus to market growth
This raises doubts about the CFTC’s real ability to supervise the markets it itself encourages.
States try to fill the regulatory vacuum
Given the lack of firmer action from the CFTC, state regulators began to act on their own.
States like:
- Nevada
- Massachusetts
- New York
- Ohio
- New Jersey
have already adopted measures to restrict or challenge sporting event contractsclaiming that these products resemble traditional sports bettingwhich require state licenses.
The platforms argue that the Federal law prevails over state laws and have already filed lawsuits against several states. Court decisions so far have been contradictory, creating an uncertain legal landscape.
The CFTC, in turn, has avoided taking a position. At his confirmation hearing, Selig said he preferred to leave the matter to the courts.
A watershed moment for prediction markets
During his Senate confirmation, Mike Selig summed up the agency’s challenge with one blunt sentence:
“It is vital that there is a police officer on the beat.”
However, today the CFTC:
- Account with only one active commissionerwhen the normal is five
- Sees its main inspection office practically emptied
- Oversee a rapidly growing market, especially in sporting events
For operators, investors and regulators, the imbalance between market growth and oversight capacity could define the direction of prediction markets in the coming years — even if the topic ends up reaching the Supreme Court of the United States.
Source: Gambling Insider
Fonte: Gaming365 – Brasil
