TD Cowen says Trump's CFTC prediction markets post unlikely to change legal fight

President Donald Trump's public support for the Commodity Futures Trading Commission's position on prediction markets is unlikely to change the broader legal fight over event contracts, according to investment bank TD Cowen.

Trump said in a Truth Social post Tuesday that it was "critically important" that the CFTC has exclusive authority over prediction markets. The post came as prediction market platforms such as Polymarket and Kalshi continue facing legal cases from several states over gambling-related contracts, with the broader issue being whether event contracts fall under federal commodities law or state gambling laws.

TD Cowen said Trump's support for the CFTC's authority over prediction markets was not surprising.

"We have always assumed that President Trump was backing CFTC Chair Michael Selig's advocacy for prediction markets including his contention that states lack the power to block event contracts on sporting events," Jaret Seiberg, managing director at TD Cowen's Washington Research Group, said in a note on Wednesday. "It was hard for us to see how Selig could so aggressively push for prediction markets without Trump's backing."

Seiberg also noted that Trump's post appeared aimed more at defending Selig following a recent New York Times investigative report into the CFTC's handling of crypto and prediction markets than at materially shifting policy.

"We do not see this social media post as ending political interest in that report which likely will be the starting point for Democratic investigations," he said.

'Up to the Supreme Court to decide'

Trump's post changes little because the bigger issue is now before the federal courts rather than regulators or the executive branch, according to Seiberg.

Seiberg said he continues to believe the Supreme Court will ultimately decide whether Congress preempted state laws on sports gambling when it established event contracts.

"We continue to give the advantage to the states in this fight, as the states have long been in charge of regulating sports gambling," Seiberg said. "Litigation could still take two years or longer to fully play out."

This is not the first time Seiberg has shared this view. Last week, following a Senate Commerce hearing on prediction markets, Seiberg said legislative risk is rising as frustration grows in Washington over the industry. However, he said he does not expect Congress to pass legislation until the Supreme Court clarifies whether states can regulate sports-related event contracts.

That suggests the bigger legislative risk may come in 2027 or later, even if there are political headlines this year, Seiberg said at the time.

Earlier this year, Seiberg also said recent U.S. bills targeting prediction markets, including proposals to ban sports and political event contracts, are unlikely to pass in the current Congress. He added that policy risk remains high, with the 2028 election potentially becoming the bigger threat as bipartisan concerns grow over prediction markets potentially bypassing state gambling rules.

Notably, the White House is reviewing a new CFTC proposal that would establish guidelines for prediction markets and event contracts. The proposal is currently under review by the Office of Management and Budget and will later be opened for public comment.

Earlier this week, Seiberg also shared his thoughts on the Clarity Act, the proposed crypto market structure bill, warning that growing political controversies involving Trump and his administration were making it harder for Democrats to support the bill. He remains pessimistic that the crypto market structure bill will pass this year.