America’s commodity regulator has bent over backward to favor crypto and prediction market operators while turfing senior staff who dared to raise concerns about these companies’ operations.
This weekend, the New York Times dropped a bombshell report on How Prediction Markets and Crypto Firms Steamrolled a Watchdog Agency. The report details how senior career staff at the U.S. Commodity Futures Trading Commission (CFTC) were shown the door in apparent retaliation for raising concerns about the favoritism shown to crypto/prediction firms with ties to the family of President Donald Trump.
The report primarily focuses on the second half of 2025, a period when acting chair Caroline Pham led the CFTC. For much of this period, Pham was also the agency’s sole commissioner following the resignations of other commissioners and delays in approving the current chair, Michael Selig.
The Times reported that CFTC officials expressed concerns that the Crypto.com digital asset exchange’s prediction market might not be “treating small bettors fairly.” The officials also warned that Polymarket appeared to lack “strong enough protections against fraud,” while the Gemini (NASDAQ: GEMI) exchange was proceeding with plans to launch its prediction market despite having yet to pass the CFTC’s required review.
Crypto.com has partnered with the Trump family on several crypto-related ventures (including a prediction market) and donated $11 million to Trump-related projects. Polymarket received a “double-digit millions” investment from the 1789 Capital firm linked with Donald Trump Jr., who also serves as a Polymarket adviser.
Gemini founders Cameron and Tyler Winklevoss are backers of the Trump family’s block reward mining/digital asset treasury firm American Bitcoin Corp (NASDAQ: ABTC). The Winklevii have also donated generously to Trump’s pet projects and launched a political action committee to support Republican candidates who back Trump’s agenda.
The Times claimed that Pham and her senior counsel, Brigitte Weyls, “intervened to help the firms get what they wanted.” In the spring of 2025, Pham’s office launched investigations of three officials who’d handled crypto enforcement cases, including enforcement division chief counsel Gretchen Lowe, deputy director Manal Sultan, and chief trial attorney K. Brent Tomer.
By Christmas, Sultan and Tomer had been placed on leave and barred from the CFTC office. Two other trial attorneys who handled crypto cases were demoted, while Lowe chose to resign. The Times claimed none of these officials were ever told what they’d done to deserve this treatment.
Former CFTC trial attorney Andrew Rodgers, who resigned last year, said there was “a sustained effort to oust enforcement staff” who’d worked on crypto cases, while attorney Jon Konizeski said he received orders on two separate occasions to close crypto-related probes before he was turfed. Konizeski said the CFTC was sending a message “to bad actors in the crypto space that it is not coming after them.”
Let ‘em cook
Pham’s interventions on behalf of crypto operators reportedly began just a month after Trump’s second inauguration, which led to her appointment as acting CFTC chair. In February 2025, the agency’s enforcement director, Brian Young, informed CFTC attorneys that Pham wanted them to drop the agency’s suit against the KuCoin exchange, which in March 2024 was charged with offering derivatives to U.S. customers without CFTC approval.
Though this ‘request’ came just one month after Kucoin reached a $300 million settlement with the U.S. Department of Justice (DoJ) for operating an unlicensed money transmitting business, CFTC attorneys reportedly agreed to rewrite the agency’s proposed settlement with Kucoin. (The issue wasn’t resolved until this March, when KuCoin’s parent company agreed to pay $500,000 but didn’t have to disgorge funds earned from its unauthorized activities.)
The Times noted that, while these negotiations were ongoing, KuCoin listed two tokens related to the Trump family’s World Liberty Financial (WLF) project. KuCoin told the Times that the listings had nothing to do with the charges it was facing.
Last December, Weyls appeared to lean on CFTC staff to approve Gemini’s application to launch its prediction market offering after its two previous applications were rejected. While the latest application was under review, Weyls sent CFTC staff a memo recommending that they approve the application. This was a reversal of the traditional method, under which staff write such recommendations to commissioners.
Meanwhile, a Crypto.com public filing alerted CFTC staff to the fact that the company’s prediction market “was giving large trading companies a leg up over ordinary sports bettors without fully disclosing the practice.” When CFTC staff raised concerns, Pham and Weyls reportedly “discouraged them from pursuing the matter, then cut them out of discussions with the firm.”
The CFTC’s dealings with Polymarket took a turn last autumn after the firm requested permission to take wagers through intermediaries. This would boost the company’s liquidity but also potentially provide a mask for anyone looking to use insider information to game the system.
Two weeks after that request was made, 1789 Capital made its investment in Polymarket. Despite the government being in the middle of a six-week shutdown, CFTC staff were reportedly summoned to work on Polymarket’s request.
In November, Weyls broke with CFTC tradition by attending a meeting of CFTC staff to consider Polymarket’s request. At this meeting, the CFTC’s acting director of market oversight, Rahul Varma, and deputy director of compliance, Rachel Berdansky, each voiced concerns about Polymarket’s anti-fraud protocols.
In the end, Polymarket’s request was approved, while Berdansky was placed under investigation and put on administrative leave. She later retired, while Varma’s position was eliminated.
The Times noted that, following Selig’s Senate confirmation, Pham rejoined the private sector with crypto fintech Moonpay—which has partnered with Polymarket on the launch of its own prediction market—while Weyls went to work as general counsel for Gemini’s prediction market offshoot Gemini Titan.
Little help?
The Times reminded its readers that Selig’s pre-CFTC work included serving as a corporate lawyer representing crypto firms, including the crypto-focused venture capital group Paradigm, launched by Fred Ehrsam, co-founder of the Coinbase (NASDAQ: COIN) exchange.
Under Selig’s tenure, the CFTC has launched only one enforcement action related to prediction markets (the recent military insider trading case on Polymarket) and only two crypto-related actions, both of the latter cases targeting “individual operators accused of fraud, not against more powerful crypto firms.”
Under Pham’s tenure, the CFTC saw a ~25% reduction in its staff headcount, which the regulator said was part of the government-wide purge of civil servants under Elon Musk’s controversial DOGE project. And while Selig claims the CFTC is “hiring,” the agency has so far requested only three additional enforcement employees.
The CFTC’s leadership is currently a one-man affair, as Trump has yet to nominate anyone to fill the four empty commissioner seats. These ongoing vacancies led House of Representatives Agriculture Committee chair Glenn Thompson (R-PA) and ranking member Angie Craig (D-MN) to send a joint letter on May 15 urging Trump to “nominate a full panel of bipartisan Commissioners to join Chairman Selig in implementing the agenda charted for the Commission.”
The CFTC’s agenda could soon include taking on the bulk of digital asset oversight, as envisioned by the digital asset market structure legislation still winding its way through the Senate. The letter notes that this new responsibility “significantly expands the CFTC’s mandate” and will “require a significant rulemaking process” that’s best served by having a variety of voices/inputs, not just Selig’s.
Congress to probe insider trades
On May 17, the CBS network’s flagship 60 Minutes program did a segment on Polymarket’s insider trading scandal involving Special Forces soldier Gannon Ken Van Dyke. The program warned of even larger military-related insider trades occurring on the platform.
Recent studies show that longshot bets on military/defense events on Polymarket pay off more than 52% of the time, a win rate nearly 4x the average of longshot bets on other types of events. But the head of investigations for Paris-based data analytics firm Bubblemaps, who goes by the pseudonym Deebs, told 60 Minutes that a cluster of nine connected Polymarket accounts that wagered almost exclusively on U.S. military operations in Iran had a combined win rate of 98%.
And while Van Dyke won ~$400,000 on his allegedly insider bets, these other nine accounts collectively made $2.4 million. Deebs said, “This is like winning the lottery multiple times.” Bubblemaps’ Nicolas Vaiman added that “luck alone cannot explain those numbers.”
60 Minutes correspondent Jon Wertheim quoted a Defense Department source saying Van Dyke was “just a small fish” and that there were “dozens more of these” insider cases. There are growing fears that America’s opponents might glean valuable advance information by watching sudden movements in these markets. Deebs, a former military officer, said: “This could be putting people’s lives at risk.”
Some members of Congress have introduced legislation to combat insider trading in prediction markets, but none of these bills has made much progress. However, last Friday, May 22, the House Oversight Committee announced plans to probe insider trading on Polymarket and its closest rival, Kalshi.
Oversight chair James Comer (R-KY) sent letters to the CEOs of both companies requesting “documents and information to better understand how [each company] implements identity verification for domestic and international account holders, enforces geographic restrictions, and detects anomalous trading activity to prevent insider trading across [their] global platform[s].”
Comer’s letter said these internal records “are the only means by which bad actors can be identified and to determine whether platforms are meeting their legal obligations.” Both companies issued statements emphasizing their desire to cooperate with Congress.
Comer told CNBC that the probes were sparked by concerns that government employees at all levels “can use basic insider knowledge and make huge profits on anything government related.” Comer said the probe would determine “how widespread this has been thus far, but also to prove a case that we’ve got to pass some type of legislation,” adding that a ban on government figures participating in prediction markets “wouldn’t be too much to ask.”
Marco Rubio says prediction markets are gambling
The rising political pressure on the prediction market sector was reflected in last week’s launch of Americans for Fair Markets (AFM), a Kalshi-funded advocacy group aiming to “shape federal policy on prediction markets and federally regulated exchanges.”
AFM joins the existing Coalition for Prediction Markets (CPM), whose members include Kalshi, Crypto.com, Coinbase, and others, and whose advisers include former Rep. Patrick McHenry (R-NC).
Just as CPM argues that “state casino regulators are attempting to impose gambling-style oversight on federally supervised prediction markets,” AFM plans to “take on the sportsbook and casino interests that are focused on protecting their monopolies and seeding lies about prediction markets to policymakers.”
The AFM wants to amplify the prediction market industry’s public stance that, despite all evidence to the contrary, ‘event contracts’ involving sports events are totally different from plain old sports bets.
And yet, Kalshi still relies on sports for three-quarters of its ‘trading’ volume. While that’s down slightly from 85% last year, there’s not a whole lot of pie left once you factor in ‘exotics’ markets (10.6%), Kalshi’s second-largest slice that include sports-related parlay wagering.
Polymarket recently filed an application with the CFTC to offer its own parlay sports bets, or, as it calls them, ‘Combinatoric Athletic Outcome Contracts.’ Ahem. Seriously, ahem.
(For the record, U.S. Secretary of State Marco Rubio was recently asked by Triumph the Insult Comic Dog to divulge which country America might attack next so the foul-mouthed puppet could “win some money on Polymarket!” Rubio responded that it’s “illegal for dogs to gamble.” So count at least one Trump cabinet member who isn’t buying the ‘it’s not betting’ narrative.)
While the timing is likely coincidental, Kalshi’s AFM debuted just two days after the Senate Commerce Committee held a hearing on the impact of prediction markets on the integrity of sporting events.
The hearing featured Sen. John Hickenlooper (D-CO) pointing out that prediction markets allow customers across the U.S. to wager on sports ‘events’ at age 18, rather than the 21-year-old requirement for sports betting in most states.
McHenry, who appeared on behalf of the CPM, was asked by Sen. John Curtis (R-UT) to define a prediction market. McHenry said, “It is an open exchange. It is under commodities regulation called a swap. You have folks that have a contract. Some say yes, some say no. And they determine it, the marketplace, the consumers, and the participants determine what is the ratio on the contract, the likelihood of something happening.”
Curtis said McHenry’s answer seemed to “meet every definition of gambling,” every form of which is illegal in Utah. Curtis has sponsored bipartisan legislation with colleague Adam Schiff (D-CA) that would prohibit CFTC-registered companies from offering sports betting or ‘casino-style’ games.
‘Rogue CFTC’ spending taxpayer money fighting (Democrat-led) states over sports betting
American Gaming Association CEO Bill Miller told the committee that prediction markets are “making a mockery” of America’s traditional approach of allowing states to determine what types of gambling are okay within their borders.
In this, Miller said the companies were being “aided by a rogue CFTC” deploying its in-house attorneys to legally challenge states that have attempted to limit prediction markets’ activities.
On May 19, the CFTC filed a lawsuit against Minnesota and its Gov. Tim Walz for passing a law that makes the state the first in the nation to outright ban prediction markets. The law, which takes effect in August, makes it illegal to host or advertise a prediction market while offering a carveout for trading on more traditional futures events, like the weather.
The CFTC’s reliably hyperbolic statement announcing its lawsuit quoted Chairman Selig saying Minnesota’s law “turns lawful operators and participants in prediction markets into felons overnight.” Selig also accused Walz of choosing to “put special interests first and American farmers and innovators last.”
The CFTC previously sued Arizona, Connecticut, Illinois, New York, and Wisconsin, and at this rate, it should have its 50-state bingo card pretty much filled up by Christmas. But as CNBC recently observed, Selig has yet to sue a state where the attorney general is a Republican. For instance, in Utah, where Gov. Spencer Cox recently signed his state’s amendment of its constitution to include ‘proposition bets’ in its list of illegal gambling products, and has yet to suffer any CFTC blowback.
Ohio’s attorney general is also a Republican, but the CFTC has taken a less aggressive stance in pushing back on that state’s prediction market fight. On May 12, the CFTC filed an amicus brief in the U.S. Court of Appeals for the Sixth Circuit to protest a federal court denying Kalshi’s bid for a preliminary injunction against the Ohio Casino Control Commission.
Selig claimed the Ohio court “took an improperly narrow view of the Commission’s jurisdiction,” while vowing that the CFTC “will not allow overzealous state governments to undermine the agency’s longstanding authority over these markets.”
On May 21, the U.S. Court of Appeals for the Ninth Circuit rejected bids by Kalshi and Polymarket to transfer their legal fights with Nevada and Washington to federal court. Nevada has argued that the two companies lack state gaming licenses, while Washington has accused Kalshi of offering illegal gambling products.
In the Nevada case, the Ninth Circuit rejected Kalshi’s argument that the issue was a question of federal jurisdiction, while also ruling that Kalshi had failed to show that litigating the matter in state court threatened irreparable harm. A federal judge in Illinois issued a similar ruling against Kalshi and other prediction markets in April.
But the CFTC has also won a couple of legal skirmishes, including a preliminary injunction against Arizona’s attempt to file criminal charges against Kalshi. The CFTC also beat back New Jersey’s efforts to apply state gambling laws against prediction markets.
Rhode Island’s AG Peter Neronha sued Kalshi and Polymarket last week, saying “there is no substantive difference between sports betting and ‘events contracts.’” Neronha claimed the companies are siphoning revenue away from the state lottery’s sports betting business, with “bets decreasing 8% from 2024 to 2025.” (Since Rhode Island has a Democratic governor, expect Selig to file his retaliatory suit any day now.)
During last week’s Senate hearing, Commerce chair Ted Cruz (R-TX) acknowledged the fact that “the courts are split” on whether states have the right to restrict prediction market activities and that the U.S. Supreme Court would likely need to weigh in to settle the matter, “unless Congress acts.”
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