Lawyer: CLARITY Act may grant more authority to the CFTC to strengthen oversight of prediction markets.

The U.S. House Agriculture Subcommittee on Commodity Markets, Digital Assets, and Rural Development held a hearing to discuss how the U.S. Commodity Futures Trading Commission (CFTC) can strengthen oversight of prediction market platforms including Kalshi and Polymarket, as well as the potential role of the Digital Asset Market Clarity Act (CLARITY Act). Carl Kennedy, a partner at New York law firm Katten Muchin Rosenman, testified at the hearing that the CFTC is currently understaffed, making it difficult to effectively regulate the fast-growing prediction market and digital asset sectors. He argued that if the CLARITY Act is passed, it would grant the CFTC more regulatory authority and help it address the "explosive growth" of prediction markets. CFTC Chairman Michael Selig has maintained that event contracts on prediction markets fall under swap products regulated by the Commodity Exchange Act, giving the CFTC exclusive regulatory authority. This position has sparked a jurisdictional dispute between federal and state regulators; multiple states have previously sued Kalshi and Polymarket over sports event prediction markets. Market observers expect related cases may eventually be brought before the U.S. Supreme Court to clarify the division of regulatory authority between the federal and state governments over prediction markets. Additionally, Republican lawmakers plan to push for a vote on the CLARITY Act before Congress’s August recess and will release the bill text soon. In June this year, U.S. gambling industry groups called for the CLARITY Act to explicitly ban event contracts related to sports events and casino gambling.