Trump Prediction Markets Post Unlikely to Alter CFTC Legal Fight, TD Cowen Says
0h ago|4 min readStandard
Fazen Markets Editorial Desk
Collective editorial team · methodology
prediction-marketscfct
Fazen Markets Editorial Desk
Collective editorial team · methodology
Trades XAUUSD 24/5 on autopilot. Verified Myfxbook performance. Free forever.
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The majority of retail investor accounts lose money when trading CFDs. Vortex HFT is informational software — not investment advice. Past performance does not guarantee future results.
TD Cowen analysts stated on May 27, 2026, that a recent social media post from former President Donald Trump regarding prediction markets is unlikely to influence the legal and regulatory battle surrounding their approval by the Commodity Futures Trading Commission. The firm's Washington Research Group concluded that the ultimate fate of event contracts will be decided by the Supreme Court. States currently maintain a structural advantage in opposing these markets, which allow traders to speculate on political and other non-economic outcomes.
Political event contracts have been a contentious topic for US regulators for over two decades. The CFTC first rejected a proposal for a political event futures exchange from Intrade in 2012, citing concerns over the potential for trading to be linked to illegal activity. The current regulatory struggle intensified in 2024 when Kalshi Inc. filed a formal request with the CFTC to list contracts tied to congressional control.
The CFTC's staff initially recommended approving Kalshi’s proposal, but the commission itself voted 3-2 to reject it in late 2025. That rejection is now the subject of ongoing litigation, placing the issue squarely within the federal court system. The backdrop includes a highly polarized political environment and increasing interest in alternative data sources for forecasting election probabilities among institutional investors.
The scale of the potential market is significant. Globally, the prediction market industry handles an estimated $15 billion in annual wagers, though much of this activity occurs on offshore or unregulated platforms. A regulated US market could capture a substantial portion of this volume.
For comparison, the total US sports betting market reached $120 billion in handle during 2025, demonstrating a high domestic appetite for regulated speculative wagering. Prediction market platforms like Polymarket, which operates offshore, have seen single-event volumes exceed $50 million. The table below contrasts key metrics between established markets and prediction markets.
| Market Type | Annual Handle (Est.) | Primary US Regulator | Legal Status |
|---|---|---|---|
| Sports Betting | $120 Billion | State Agencies | Legal in 38 states |
| Prediction Markets | $15 Billion (Global) | CFTC / States | Largely prohibited |
Opposition from state regulators is a major hurdle. The North American Securities Administrators Association, representing state securities regulators, has consistently opposed CFTC-approved event contracts, arguing they infringe on state authority.
The immediate implication is a maintained status quo, preventing a new asset class from emerging for US brokers and exchanges. Established sports betting operators like DraftKings [DKNG] and FanDuel parent Flutter Entertainment [FLUT] would face new, conceptually similar competitors if prediction markets gained approval. These companies have invested heavily in compliance infrastructure that could be adapted, but new entrants would likely capture initial market share.
A legal victory for prediction markets would benefit specialized platforms aiming to enter the US market, though no publicly traded pure-plays currently exist. It could also create a new source of volatility for certain stocks sensitive to political outcomes, such as clean energy companies [ICLN] or defense contractors [LMT, RTX], as market-derived probabilities became a more prominent indicator. The primary risk to this analysis is that Congressional action could preempt any court ruling, effectively banning the product class entirely. Current trading flow remains confined to crypto-native platforms, with no material impact on major equity indices.
The next major catalyst is a briefing schedule in Kalshi's lawsuit against the CFTC, with initial legal briefs expected by the end of Q3 2026. The case is likely to advance to the U.S. Court of Appeals for the District of Columbia Circuit, a key venue for administrative law challenges.
A final decision from the Supreme Court is not expected before late 2027. Investors should monitor the composition of the CFTC commission following the 2026 elections, as a shift in the majority could lead to a settlement of the lawsuit. Key levels to watch are any judicial rulings that address the core question of whether political event contracts are contrary to the public interest, the legal standard the CFTC must apply.
Prediction markets are exchange-traded platforms where participants buy and sell contracts whose payout is tied to the outcome of a specific event, such as an election result. If the event occurs, the contract settles at a value of $1; if it does not, it settles at $0. The trading price before settlement represents the market’s collective probability assessment of that outcome. These are considered a form of event derivative, distinct from traditional sports betting due to their structure and potential for use in hedging and forecasting.
Currently, retail investors in the US have no legal access to regulated prediction markets on major financial platforms. A change in the CFTC's stance would potentially allow brokers like Charles Schwab or Fidelity to offer these products, creating a new, highly speculative asset class. Retail traders would gain a direct tool for expressing geopolitical views, but would also be exposed to significant risk, as these contracts can expire worthless based on unpredictable real-world events.
Legal challenges to CFTC product disapproval orders are rare and face an uphill battle. Courts typically grant the agency significant deference under the Chevron doctrine, which instructs judges to respect reasonable interpretations of ambiguous statutes by federal agencies. However, the current Supreme Court has shown a willingness to curtail this deference, as seen in its 2025 ruling in Loper Bright Enterprises v. Raimondo, which makes the outcome of this specific challenge more uncertain than past cases.
The path to US prediction markets runs through the Supreme Court, not the political arena.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.
Vortex HFT is our free MT4/MT5 Expert Advisor. Verified Myfxbook performance. No subscription. No fees. Trades 24/5.
Navigate market volatility with professional tools
Start TradingSponsored
Open a demo account in 30 seconds. No deposit required.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.