CLARITY Act Regulation Nears Vote — Can a 1-Commissioner CFTC Cope?

Prediction markets have grown fast enough to outpace the regulators supposed to watch them. Now, a landmark piece of legislation may force Washington to catch up — but the agency that would take the wheel is already struggling to keep the lights on.

Key takeaways

• The CLARITY Act, pending in the US Senate, could grant the CFTC expanded authority to regulate prediction markets alongside digital assets.
• Carl Kennedy of Katten Muchin Rosenman testified that the CFTC is currently too short-staffed to fully regulate platforms like Kalshi and Polymarket.
• CFTC Chair Michael Selig has unilaterally asserted exclusive jurisdiction over prediction markets, classifying event contracts as swaps.
• Selig is the only Senate-confirmed commissioner at the CFTC, which normally operates with five.
• Republican senators aim to release the CLARITY Act text soon and push for a vote before the August recess.

Potential Expansion of CFTC Authority via the CLARITY Act

The Digital Asset Market Clarity Act — the CLARITY Act — is shaping up as the most consequential piece of US financial regulation in years. Designed primarily to bring order to the crypto market structure debate, the legislation could also hand the Commodity Futures Trading Commission a formal mandate to oversee prediction markets, addressing what legal experts describe as an uncontrolled surge in that sector.

Speaking before the US House Committee on Agriculture’s Subcommittee on Commodity Markets, Digital Assets, and Rural Development, Carl Kennedy, a partner at New York law firm Katten Muchin Rosenman, put it plainly. The CFTC, he said, was likely too “short-staffed” to fully handle the regulation and enforcement responsibilities that platforms like Kalshi and Polymarket now demand. The CLARITY Act, in his view, could supply both the authority and the resources the agency needs to address the “explosive growth of prediction markets.”

“I do believe that with additional resources — they’re about to perhaps receive additional authorities under the CLARITY Act — with additional resources to address these new asset classes in the cash markets and crypto, as well as to deal with the explosive growth of prediction markets, I think that the CFTC certainly should receive additional resources,” Kennedy said.

Legislative intent and the road to a vote

Republican senators pushing the bill say they plan to release its full text soon, with a target of passing it before Congress breaks for the August recess. What remains confidential as of this writing is exactly how the legislation will address prediction markets, ethics requirements, and the boundary lines between the CFTC and other regulators. Those details matter enormously, because the bill’s scope will determine whether the agency gets a clear legal foundation to act — or simply a broader but still ambiguous mandate.

The Senate Banking Committee approved the CLARITY Act on May 14, 2026, by a 15-9 vote, with all Republican committee members and two Democrats in favor, according to reporting by Crypto Briefing. That bipartisan signal has given the bill momentum, though the specifics of its prediction market provisions are still being negotiated behind closed doors.

Current CFTC Challenges in Prediction Market Oversight

The staffing problem at the CFTC is not a minor administrative footnote — it is a structural vulnerability that shapes what the agency can realistically do right now.

An agency running on a skeleton crew

Michael Selig, confirmed by the Senate in December, is currently the only Senate-confirmed member heading the CFTC. The agency’s leadership panel is designed to function with five commissioners. Operating with a single confirmed leader means the CFTC lacks the internal decision-making depth to rapidly scale enforcement or rulemaking in a fast-moving sector like prediction markets. Kennedy’s testimony made clear that even if the CLARITY Act expands the agency’s legal authority, resources and personnel would need to follow for the mandate to be meaningful.

This is where the practical gap between legislative intent and regulatory reality becomes most visible. Granting a short-staffed agency broader oversight powers does not automatically translate into effective supervision. Without a full complement of commissioners and adequate enforcement personnel, new authority on paper may not produce much change on the ground for platforms and their users.

Regulatory Positions and Industry Responses

Chair Selig has not waited for Congress to act. Since his Senate confirmation in December, he has taken the position that the CFTC already holds exclusive jurisdiction over prediction market platforms, arguing that the event contracts traded on sites like Kalshi and Polymarket qualify as “swaps” under existing law — placing them squarely within the CFTC’s regulatory purview.

That interpretation is significant. Classifying event contracts as swaps gives the CFTC a legal hook to regulate, supervise, and potentially discipline these platforms without waiting for new legislation. But it is also a position Selig has taken unilaterally, and one that remains open to legal challenge given the novel nature of the products involved.

Gambling industry opposition and ethics provisions

Not everyone wants the CFTC’s reach to extend this far. In June, gambling industry groups petitioned the US Senate to add language to the CLARITY Act that would explicitly prohibit event contracts tied to sports and casino-style gaming. Their concern is straightforward: if prediction markets can offer products that closely resemble sports betting, it erodes the regulated gambling industry’s competitive position.

Separately, the Trump administration confirmed it had agreed to what it called “the most comprehensive and wide-ranging ethics provision in history” and that it had “bent over backward to accommodate Democrats’ concerns.” The precise content of those ethics provisions — and how they interact with prediction market regulation — has not been made public.

What Happens Next for Prediction Market Regulation

The hearing before the House agriculture subcommittee reflects growing congressional awareness that prediction markets can no longer be treated as a regulatory afterthought. Platforms in this space have expanded dramatically, drawing in retail participants and institutional attention alike, and the current oversight framework — built around a short-staffed agency and a chair asserting jurisdiction through regulatory interpretation rather than statute — is fragile by design.

The CLARITY Act, if passed with strong prediction market provisions and paired with meaningful resource commitments, could resolve that fragility. It would give the CFTC a statutory basis for its authority, reducing the legal risk that comes with Selig’s current unilateral approach. But the bill’s text is still unreleased, the August deadline is tight, and the gambling lobby is actively trying to carve out the most commercially sensitive event contracts before the ink dries.

For Kalshi, Polymarket, and any future entrant in this space, the coming weeks in Washington may determine whether they operate under a clear, stable rulebook — or spend the next several years in the same regulatory gray zone they have navigated until now.

FAQ

What is the CLARITY Act and how does it relate to the CFTC?

The CLARITY Act is pending legislation in the US Senate expected to grant the CFTC expanded authority and resources to regulate prediction markets and digital assets, providing a clearer statutory foundation for the agency’s oversight role.

Why is the CFTC considered under-resourced for prediction market regulation?

According to testimony by Carl Kennedy of Katten Muchin Rosenman before a House subcommittee, the CFTC currently lacks sufficient staff to fully regulate platforms like Kalshi and Polymarket, and operates with only one Senate-confirmed commissioner instead of the usual five.

What is the regulatory position of the CFTC Chair on prediction markets?

CFTC Chair Michael Selig has asserted that the agency holds exclusive jurisdiction over prediction markets, classifying event contracts on those platforms as swaps under existing law — a position he has taken without waiting for new congressional authorization.

What opposition exists to including prediction markets under the CLARITY Act?

Gambling industry groups petitioned the Senate in June to add language explicitly prohibiting event contracts tied to sports and casino-style gaming. Additionally, ethics provisions agreed to by the Trump administration remain confidential, leaving the full scope of the legislation unclear ahead of its formal release.

Article produced with the assistance of artificial intelligence and reviewed by the editorial team.