CFTC Chairman Michael Selig Talks About Catching Political Figures Attempting To Trade Prediction Markets — 'Oftentimes After The Fact'

Selig warned that treating prediction markets like casinos would be "a real harm to the American people."

• He said many traders reach exchanges through brokers, so they aren't always flagged before placing a bid. 
• Selig added that the CFTC is weighing new regulations to close that gap. 
• His comments came a day after the CFTC proposed its first set of crypto market rules.

As Bitcoin (BTC) held above $85,000 on Tuesday, Commodity Futures Trading Commission (CFTC) Chairman Michael ‘Mike’ Selig said the agency has caught political figures trying to trade on prediction markets. 

Speaking on CNBC's ‘Squawk Box,' Selig said, "We have seen certain political figures attempt to trade in these markets, and we’ve caught it." He added that it is "oftentimes after the fact," though sometimes beforehand. This matters because prediction markets let users bet on real-world events, including elections and policy decisions, where officials may know more than the broader public. 

Selig said letting government officials trade these contracts creates a clear problem. Officials could use what they know or shape how the contracts are priced. He said this issue "does present a risk of manipulation or fraud, and that's certainly something my agency would be concerned about.” 

CFTC Eyes New Rules To Close Prediction Market KYC Gap

Selig pointed to a gap in how platforms check their users. Exchanges run know-your-customer (KYC) checks, which verify who a customer is, but many traders reach an exchange through a broker, which handles that screening instead. That means a trader is not always flagged before placing a bet.

Selig said that the CFTC is weighing new regulations to close that gap. He also had a warning for firms trying to bend the rules for market profits. “I caution many of these firms that think they can get away with manipulative strategies or insider trading,” he said, adding that many of the agency's recent enforcement actions have targeted prediction markets.

Selig Warns Of 'Real Harm'

Selig also pushed back against states that want to regulate the platforms as if they were casinos. He said that approach would leave "an order book with absolutely no market-based controls in price," calling it "a real harm to the American people." 

His comments came a day after the CFTC proposed Regulation Crypto Asset Transactions and Regulation Crypto Asset Markets, its first set of crypto market rules. 

Selig had explained the rules are meant to protect traders from fraud and abuse, the same concern he raised about prediction markets. He also added that the agency is "really excited to get some clear rules of the road in place," giving crypto firms clearer guidelines to follow. 

This announcement came as Bitcoin’s price edged higher, up 0.2% over the past 24 hours. On Stocktwits, the retail sentiment around Bitcoin remained in the ‘neutral’ zone, with chatter at ‘low’ levels over the last day.

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