The question of who should oversee prediction markets continues to divide regulators, lawmakers, and the states. During a recent House hearing, former Commodity Futures Trading Commission (CFTC) General Counsel Rob Schwartz argued that, in his view, Congress had already answered that question years ago.
Schwartz, now a partner at Morgan Lewis, told members of the House Agriculture Subcommittee that the Commodity Exchange Act gives the CFTC the authority to oversee event contracts. His testimony comes as the agency faces growing criticism from states that believe sports-related contracts should remain under their control instead.
Schwartz Says the Current Framework Already Works
Rather than calling for new legislation, Schwartz argued that the existing law already gives the commission the tools it needs. He told lawmakers that the CFTC can approve or reject event contracts based on whether they meet the public-interest standard outlined in the Commodity Exchange Act.
In his view, if regulators believe a particular contract creates concerns, the agency already has the power to stop it from being listed. His testimony centered on a few key points:
- The Commodity Exchange Act already gives the CFTC authority over event contracts.
- The commission can prevent exchanges from listing contracts it deems problematic.
- Unless Congress changes the law, those decisions should stay with the CFTC.
His Comments Add Another Voice to an Ongoing Dispute
Schwartz's testimony arrives at a time when the debate over prediction markets has become increasingly crowded. Just days earlier, attorneys general from 44 states submitted comments arguing that the CFTC's proposed prediction markets rule goes beyond the authority Congress intended for the agency. Professional sports leagues have also weighed in, raising concerns about certain sports-related contracts and their potential impact on game integrity.
Looking across the growing list of comments, one thing becomes clear. There is no disagreement that prediction markets have become a major issue. The disagreement is over who should be making the rules.
Congress is Hearing Both Sides
Courtrooms have dominated much of the discussion in prediction markets over the past year, but Congress is becoming a much bigger part of the story. Lawmakers have started hearing testimony from former regulators, attorneys, industry leaders, and consumer advocates as they try to understand where the legal boundaries actually exist.
Schwartz urged Congress to recognize that the current framework designates the CFTC as the primary regulator unless lawmakers choose to rewrite the law. That doesn't end the debate, but it gives lawmakers another perspective as they consider whether additional legislation is necessary.
The Trade Handle Prediction Markets Take
What's interesting here is that nearly everyone involved says Congress intended something different. State officials argue lawmakers never gave the CFTC authority over sports-related event contracts. Schwartz argues Congress did exactly that through the Commodity Exchange Act.
That difference in interpretation lies at the heart of almost every prediction-market lawsuit underway today. Until courts or Congress provide a more definitive answer, expect both sides to keep making their case, because the future of prediction market regulation may ultimately depend less on the platforms themselves and more on how lawmakers interpret legislation that was written years before this industry reached the mainstream.