SEC signals possible oversight of surging $63.5B prediction market sector

SEC Chair Paul Atkins said the agency may start regulating prediction markets after the industry grew to $63.5 billion and raised significant legal and regulatory questions about its activities.

Atkins spoke the the Senate Banking Committee and said these markets fall under both the SEC and CFTC, so the agencies could help regulate the industry.

SEC Chair Paul Atkins says the SEC and the CFTC may both help regulate prediction markets

Atkins told lawmakers that prediction markets need closer attention because they mix finance and betting, making them harder to regulate. Some people use these markets to place trades based on what they believe will happen in the economy or markets, while others wager on outcomes like elections, sports, or other major public events. 

Atkins also said the Securities and Exchange Commission can’t just sit on the sidelines and leave all the regulation to the Commodity Futures Trading Commission because some prediction contracts are starting to look like securities. The SEC may need to step in if these products start acting like investments that track regulated assets.

The SEC chair went on to encourage both the SEC and the CFTC to work together to ensure prediction markets don’t fall into regulatory gaps, rather than pulling in different directions. He added that the SEC already has the authority to take action on prediction markets offering products that look like securities without waiting for Congress to pass brand-new laws. 

Atkins also said regulators will revise the contracts of each prediction market to understand its activities and services, and categorize it appropriately. For instance, a prediction market could be classified as a security under the SEC jurisdiction if its contract follows the price of an individual stock.

The rapid growth of prediction markets is prompting lawsuits and attracting greater attention from federal regulators

Prediction markets have grown so fast that they have caught the attention of lawmakers and regulators. These platforms started off as basic financial tools, but have grown too quickly for regulators to ignore, especially since a lot of money and millions of users flood the space.

Security researchers at Certik reported that the prediction market industry more than quadrupled in size during 2025 and now has a valuation of $63.5 billion. That’s a massive jump for a sector that only began operations in the United States almost two years ago. 

Many officials now worry that the rules have not kept pace with what these platforms have really become, given how quickly the industry has grown. 

Kalshi and Polymarket have received the most attention because they are currently valued at roughly $11 billion and $9 billion, respectively. These numbers show just how much prediction markets have moved into mainstream finance, and most of this rise happened in 2024 during the election period, when almost everyone was obsessed with political outcomes. 

But as the industry grows, it has faced significant resistance from state regulators, and several states have already filed lawsuits against prediction markets in recent months. These states claim that the contracts look much more like unlicensed sports betting and should fall under state gambling laws.

There have also been reports of insider trading, which would have allowed a person to trade unfairly and profit from the situation before the public was aware of what was happening. This has forced the regulators to propose laws that will restrict some types of bets, especially those involving political events.

CFTC Chair Michael Selig explained that prediction markets can still be used to determine what the general public expects and to help them gauge their risks. He emphasized that regulation is important because robust regulation is necessary to ensure that these prediction markets remain legitimate, safe, and within the United States, rather than allowing the industry to migrate to countries with less regulation.

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