Lawmakers and Regulators Take Sides on Prediction Markets

Top regulators are taking sides on prediction markets.

Manhattan U.S. Attorney Jay Clayton told the Securities Enforcement Forum that he expected enforcement action tied to prediction markets. He suspected prediction markets could be a vehicle for fraud in certain cases.

Two other high-profile figures sparred over prediction markets, too. Former New Jersey Governor Chris Christie argued that prediction markets were violating sports betting laws. CFTC Chairman Michael Selig responded, “strongly disagree.”

Strong Disagree. https://t.co/wWLhcT2cXY

— Mike Selig (@MichaelSelig) February 5, 2026

The explosive growth of prediction markets has created new legal questions for financial regulators. The CFTC must confront new accusations of insider trading on prediction markets and grapple with the rapid speed of new markets being approved.

Possible margin trading on Kalshi

Division among lawmakers and regulators comes as prediction markets continue pushing for new trading features.

Kalshi has recently sought CFTC approval for margin trading. The Financial Times reported that discussions had been ongoing for months, but it would likely only be available to large institutional traders.

However, lending and leveraging projects in crypto may not be limited in the same way. Several startups are working on ways to make these features available to a wide range of retail customers.

Even if Kalshi limits its riskier trading features, these products are likely going to find ways to new customers on other platforms.

Polymarket nearly surpasses Robinhood

In January, crypto prediction market platform Polymarket got almost the same number of site visits as Robinhood. It speaks to the large growth that Polymarket has experienced among Americans since the 2024 presidential election.

Serious business. pic.twitter.com/RcF4leTZ2x

— Shayne Coplan 🦅 (@shayne_coplan) February 6, 2026

Polymarket may have its crypto platform, but it also has a CFTC-regulated app that only offers sports contracts. It’s in the unique position of having one regulated app and another offshore site. How long Polymarket will be able to legally maintain that split is an open question. It’ll be one of the next positions regulators will have to begin taking positions on.