Democrats press Selig on CFTC oversight of offshore prediction market war bets

House Democrats are urging the Commodity Futures Trading Commission to crack down on prediction markets that allow users to bet on certain events, including U.S. military operations, after contracts circulated over the weekend tied to the rescue of American airmen in Iran.

In a letter posted on Tuesday, Democrats led by Reps. Seth Moulton and Jim McGovern sent a letter to CFTC Chair Michael Selig asking his agency about what can be done to prevent prediction market platforms not in the U.S. from allowing those bets. 

"There is something deeply sick about turning war into a gambling opportunity. We’re talking about people betting on bombings, bloodshed, and military action as if human lives are just numbers on a screen," said Rep. McGovern in a statement. "These are not harmless wagers."

The concerns come as prediction markets platforms like Kalshi and Polymarket have surged in popularity in recent years, particularly after the 2024 US presidential election cycle.

These markets allow users to trade on the outcomes of real-world events, from geopolitical developments to sports results. Lawmakers have previously raised concerns of insider trading, specifically after bets forecasted the capture of Venezuelan President Nicolás Maduro earlier this year. 

Last week, Rep. Moulton criticized Polymarket for allowing bets on when downed U.S. fighter jet pilots in Iran would be rescued.

"They could be your neighbor, a friend, a family member," Moulton said in a post on X. "And people are betting on whether or not they'll be saved." 

Polymarket responded to the post, saying it removed the market.

"It should not have been posted, and we are investigating how this slipped through our internal safeguards," the firm said. 

CFTC jurisdiction over prediction markets

The CFTC has asserted that it holds "exclusive jurisdiction" over prediction markets and is seeking to write rules as the industry expands rapidly. 

An internal CFTC rule blocks the listing of contracts that “involve, relate, or reference terrorism, assassination, war, gaming, or an activity that is unlawful under any State or Federal law," the lawmakers said in the letter. 

"The prevalence of event contracts that appear to flout United States law is concerning and indicative of a sector lacking proper oversight," the lawmakers said in the letter. "Although many of the most flagrant recent trades occurred outside the United States, this should not preclude the Commission from undertaking enforcement actions to uphold and enforce United States law."

The lawmakers asked the CFTC to answer questions around why it has not taken action and whether it has the authority to regulate insider trading, among other questions. They asked for a response by April 15.

The CFTC did not immediately respond to The Block's request for comment.