SEC chair warns some prediction markets may fall under securities laws

The head of the U.S. Securities and Exchange Commission says prediction markets are drawing serious legal and regulatory attention.

Summary

• U.S. Securities and Exchange Commission Chair Paul Atkins called prediction markets a “huge issue” as the sector faces growing legal and regulatory scrutiny.
• Atkins said some event-based contracts could fall under SEC jurisdiction if they meet the definition of a security.
• The SEC is coordinating with the Commodity Futures Trading Commission as questions mount over oversight, especially for platforms like Polymarket and Kalshi.

At a Senate Banking Committee hearing on February 12, SEC Chair Paul Atkins described rapidly-growing prediction markets as “a huge issue” for federal regulators.

Platforms such as Kalshi and Polymarket have expanded quickly since the 2024 election cycle. These markets let users speculate on outcomes from elections and sports to economic events.

Their growth, now measured in tens of billions of dollars, has pushed them into the spotlight of U.S. regulators.

Who regulates prediction markets?

Atkins said the legal status of prediction markets isn’t always clear. He noted that jurisdiction overlaps between the SEC and the Commodity Futures Trading Commission (CFTC).

“Prediction markets are exactly one thing where there’s overlapping jurisdiction potentially,” Atkins said. 

Historically, the CFTC has been seen as the primary federal regulator for these markets. Atkins said the SEC may regulate some markets depending on how they’re structured, especially if contracts resemble securities.

“We have enough authority,” he told lawmakers, adding that a “security is a security regardless how it is and some of the nuance with prediction markets and the products depends on wording.”

SEC officials are reportedly meeting weekly with their counterparts at the CFTC.

CFTC Chair Michael Selig said regulators want a framework that protects market participants without pushing these platforms offshore.

Meanwhile, prediction markets also face state-level litigation, including claims that some offerings are illegal gambling under local laws.

Recent reports have noted insider trading concerns and legislative efforts to limit political event betting.