SEC and CFTC step up coordination as prediction markets test regulatory boundaries

• The US Securities and Exchange Commission is monitoring prediction markets while coordinating with the Commodity Futures Trading Commission on oversight.

• SEC Chairman Paul Atkins told the Senate Banking Committee that the two agencies are in regular contact due to potential overlapping jurisdiction.
• Senator Dave McCormick highlighted prediction markets as a growing tool for price discovery and risk management, and asked how regulators will provide clarity.
• Atkins said classification can hinge on contract wording and on what activity is actually taking place, which can shift how products are viewed by regulators.
• Atkins did not commit to imminent rulemaking, pointing instead to the role of Congress while arguing the SEC can apply existing authority where appropriate.

The US Securities and Exchange Commission is intensifying its focus on prediction markets, working closely with the Commodity Futures Trading Commission as both agencies seek to define where responsibilities begin and end.

The issue surfaced during a recent Senate Banking Committee hearing, where SEC Chairman Paul Atkins told lawmakers that his agency is in frequent discussions with the CFTC on the supervision of prediction market activity. Atkins described the sector as a key area of attention, noting that it sits close to the line where oversight could overlap across the two commissions.

Senator Dave McCormick raised the category as an expanding segment that can support price discovery and offer tools to manage risk. While acknowledging that the CFTC is the primary regulator for these products at present, he pressed the SEC on how the two agencies are coordinating to give market participants clearer guidance.

Atkins said prediction markets are a prime example of an area where overlapping jurisdiction can arise, even if the products are currently mostly viewed through a CFTC lens. He added that consistent treatment across agencies is essential, linking progress to a closer working relationship between the leadership teams.

He pointed to the CFTC chair, Michael Selig, and said the agencies will be more harmonised than before. According to Atkins, the two chairs are in continuous communication and the SEC and CFTC are meeting once a week, including staff-level engagement, to coordinate on issues that cut across both remits.

When asked whether new prediction market rulemaking is imminent, Atkins avoided committing to a specific regulatory action. He said the outlook would depend on what Congress delivers through legislation, while also arguing the SEC already has sufficient authority to apply existing standards where circumstances warrant. He reiterated a core SEC position that a security remains a security regardless of how it is recorded or traded.

Atkins also suggested that nuance in prediction markets often turns on contract design, including the precise wording of the contract and what, in practical terms, participants are doing. He said that variability underlines the need for tight coordination with the CFTC, particularly to reduce uncertainty and prevent gaps in oversight.

The exchange took place in the context of broader discussion on crypto market structure and inter agency coordination. Atkins told lawmakers earlier in the hearing that he and the CFTC chair intend to provide a bridge towards legislation through a joint crypto initiative, framing closer alignment as a way to reduce inefficiency created by separate oversight of futures and cash markets.

Regulators are signalling that prediction markets are no longer a niche corner of financial innovation. As liquidity and mainstream participation grow, the jurisdictional question becomes unavoidable, especially where event contracts start to resemble instruments that walk and talk like securities. The SEC is positioning itself to avoid being sidelined in a market that can touch retail participation, market integrity, and investor protection.

The most important takeaway is Atkins’ emphasis on contract wording and practical activity. That is a clear warning to platforms and product designers that classification risk lives in the details. Small design choices can shift a product from being comfortably within commodities style oversight into territory where securities law expectations could apply, particularly around disclosure, marketing, and who can access the product.

For the gambling and betting sector, this is not an abstract US regulatory debate. Prediction products that reference sports outcomes can collide with state level gambling restrictions, while also attracting federal scrutiny through market structure lenses. A more harmonised SEC and CFTC approach could bring clarity, but it could also raise the compliance bar, especially if regulators decide that certain contracts need tighter controls on distribution, suitability, and surveillance.