Digital Chamber launches working group eyeing federal preemption in prediction market dispute

The Digital Chamber, a Washington-based blockchain advocacy group, has established a dedicated Prediction Markets Working Group that would lobby for federal oversight regarding prediction markets, which remain at the center of a jurisdictional tug-of-war across the United States.

“The absence of specific regulatory standards has led to inconsistent interpretations and recurring disputes,” The Digital Chamber said in a Feb. 17 letter addressed to the Commodity Futures Trading Commission chairman Mike Selig.

While applauding Selig’s efforts regarding formal rulemaking for prediction markets and his recent remarks pushing back against a regulation-by-enforcement approach, the advocacy group urged the CFTC chair to “provide tailored rulemaking and guidance” for the sector.

“Formal Commission rulemaking is necessary to promote clarity, reinforce federal preemption, enhance consumer protections, and support responsible growth in this important sector of the American financial markets,” it added.

According to The Digital Chamber, prediction markets should not be treated as gambling, as they represent an important evolution in derivatives innovation, offering tools for price discovery and risk assessment and “contribute to transparency in public and commercial forecasting.”

The group said it would collaborate with the CFTC in developing a “thoughtful and durable framework” for prediction markets.

Although the CFTC has oversight over registered derivatives platforms such as Kalshi, several state regulators across the U.S. have moved to challenge their operations, arguing that certain event contracts represent a form of unlicensed sports gambling.

Even as prediction markets remain in demand, this jurisdictional clash has created legal uncertainty, as mounting enforcement actions risk bottlenecking innovation in the sector and fragmenting oversight between federal and state authorities.

Companies like Coinbase, Kalshi, and Polymarket have countered with federal lawsuits, arguing that event contracts fall under the Commodity Exchange Act and therefore sit within the exclusive jurisdiction of the CFTC rather than state gaming boards.